The Top Financial Goals That Will Simplify Your Life - Life's Little Pleasures and Struggles

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The simplicity of your life largely depends on how you organize and manage your finances. Without setting some serious financial goals and having a plan to achieve them, you can’t really simplify your life much. Since money impacts so many aspects of your life, having financial goals can help shape your future by influencing the actions you take today.

Financial goals will help you change your mindset, your habits, and your life. Whether you want to pay off your debt, save up to buy your first home, build an emergency fund, or jump start your retirement savings, you should have your top financial goals chalked out so you can work on making lasting changes, and take control of your finances, and thus, simplify your life more.

Types of Financial Goals

A financial goal is any plan you have for your money. The best financial goals align with your values and personal objectives. Good financial goals are specific and measurable milestones that, when reached, bring you closer to your ideal lifestyle.

In the context of investment strategy, the Financial Industry Regulatory Authority (FINRA) defines the three types of financial goals as long-term (more than 10 years), mid-term (3 to 10 years) and short-term (less than 3 years). So, there are three types of financial goals: short-term, mid-term, and long term.

Short term financial goals are things that you want to accomplish in less than 3 years. Consider these to be things that are easily attainable, like cutting expenses and getting on a budget, an affordable kitchen renovation, or a trip to Europe.

Mid-term goals are things that you want to accomplish in 3-10 years like creating a fully funded emergency fund, paying off all your debts (except for your mortgage), fixing your credit score, investing in mutual funds, or saving up for the down payment of your first home.

Lastly, long term goals are those financial goals that you want to achieve within more than 10 years like saving for retirement or paying off your mortgage. Your long-term financial goals often include several short-term or mid-term goals. It’s always a good idea to break down large goals into smaller, more immediate goals.

Do keep in mind that no goal is short, medium, or long-term forever, and so the timetable for your financial goals will evolve over time. For example, retirement will be a long-term goal when you are 25, but it will be a short-term goal when you are 65.

Here are some examples of financial goals that you can adopt for yourself.

Cut your expenses

What you spend in one area directly affects how much you have left to spend in the other areas of your life.

When you spend your money with a purpose, you get the most satisfaction for that money. No matter your financial situation, it’s always wise to trim or cut spending where you can. After all, that puts more money in your pocket that you can contribute to your long-term financial goals.

Take a careful look in to your family’s expenses, and cut back on things that you really don’t need. Print a list of all your monthly expenses, circle everything you can do without, and start cutting.

You may want to choose one category each month through the year to look for ways to save money. You may find that you need to keep working on the same category so that you can continue to find ways to save money each month. If you can slash your spending a bit more each month, you will have more money to put towards your other financial and savings goals.

Related post: 20 Silly Things You Are Wasting Money On

Live on less than you earn

This one is easier said than done, but as you carefully create a sustainable budget and track your income and expenses, you should be able to stick to your budget and live within your means. It is one of the most necessary of all good financial goals. You can’t simplify your life if you don’t live below your means. When you spend more than you earn, you accumulate debt and life becomes stressful.

If you know where you stand financially, on a daily basis, and you have a plan for living within you means – knowing you are making good choices, then you are ready for most of the mundane challenges life throws at you. But if you are living paycheck to paycheck, or spending more than you earn – always scrambling and struggling to pay your bills on time, there is a stress level that clearly affects your quality of life.

By learning to live on less than you earn – regardless of your situation – you will always pay your bills on time and have extra money left. That means that you will have plenty of income for savings, investments, and for paying off debt. Thus, it will reduce your stress level drastically.

Putting it simply, you should be spending less than you earn and saving more money. If you can manage to live well below your means, you will be more likely to reach your other financial goals. When you are intentional with every dollar you have, every dollar will stretch farther. That means you get to do more of the things you want to do now, and plan for the things you will do in the future.

Pay off your debt

Becoming debt-free is one of the best things that you can accomplish in life. It will free your mind of the worry and stress that come with debt. It will also bring you freedom and options, which is why it should be one of your top financial goals.

Consider paying off your credit card debt, medical bills, any personal loans, and even student loans. If you want total freedom, consider paying off your mortgage as early as possible, and live on your own terms, not on bank’s!

When you are debt-free, you have full control over your income – and that’s an incredible feeling. It will leave you with more money for savings and investing, even for spending.

Make a specific goal on how much debt you want to get rid of this year. If possible, you should try to get completely out of debt, but depending on your income and the amount of debt you currently have, you may not be able to do that in one year.

If you follow a debt payment plan, you will speed up how quickly you can pay off your debt.

Don’t add more to your debt

This goal is key if you are serious about getting out of debt. The one exception you may make to this goal is if you are ready to buy a new home (that you can easily afford). This means you need to stop using your credit cards. If you need to buy a new car, you have to save up cash for that or try to get by with your current one as long as possible.

If you can commit to yourself that you will no longer borrow money, then you can plan ahead and save up for major purchases, and really make a dent in the amount of debt you have.

Build an emergency fund

An emergency fund is a savings account meant to cover unexpected expenses and financial emergencies. Having an emergency fund will reduce your financial stress to a large extent. When you know that you have a cushion to fall back on in case of an emergency, a lot of your stress will go away, you will sleep better at night, and enjoy great peace of mind.

According to a study from The Pew Charitable Trusts, 55% of Americans have experienced a financial shock that left them struggling. And during this unprecedented time of Covid in 2020, almost all of us suffered some sort of financial loss or setbacks. In many cases, that hardship could have been avoided with an emergency fund.

But sadly, almost 40% of American adults wouldn’t be able to cover a $400 emergency with cash, savings, or a credit-card charge that they could quickly pay off, without borrowing money or selling something, according to the Federal Reserve’s 2018 report on the economic well-being of U.S. households. This only means far too many people are living in an extremely risky predicament.

The size of your emergency fund really depends on your current situation. If you are still getting out of debt, you should have a smaller emergency fund until you pay off your debt, like $1,000.

If you want to improve your financial situation, and increase your peace of mind, you need an emergency fund big enough to cover between three and six months worth of living expenses which would include your rent or mortgage, bills, groceries, insurance payments, and other essentials. This will help cover you in the event of an emergency without accumulating more debt.

Related post: An Emergency Fund and Your Peace of Mind

Start saving for retirement

One of the most important financial goals you need to work toward throughout your entire career is saving for retirement. It’s never too early or too late to start saving for your retirement. But the earlier you can start, the better it is for you. No one likes to worry about money — especially when it’s their time to relax and work is not an option.

Consider contributing into your retirement savings fund, such as a Roth IRA or 401(k).

Investing in your retirement now, no matter how much or how little you can manage to contribute, will make your golden years less stressful and more enjoyable. Half of Americans won’t be able to maintain their standard of living in retirement. So, put your future needs before your present wants. Save your money today so you can spend it in your golden years. Your future-self will thank you.

If you have a full-time job, you should contribute up to the amount that your employer will match until you are out of debt. Once you are out of debt, then you should begin contributing 10-15 percent of your income. The amount you get from your employer’s match should count towards that fifteen percent.

Otherwise, you should contribute 5/6 percent of your earnings until you are out of debt (not counting your mortgage). This allows you to start building your retirement savings, while still freeing up money to put towards debt. If you do not qualify for a 401(k), you should consider contributing to a Roth IRA or a traditional IRA instead.

Buy a home or save for the down payment

Buying a home is a big financial move. It’s often the biggest investment for many people. A home is another way to build wealth over the years. As the value of your home increases, so does your net worth. For many, home ownership is a path to prosperity, as homeowners have significantly higher net worth than renters.

But a home is also more than a financial goal. Buying a home means so much when it comes to building a legacy and being able to leave something behind for your children and grand children. It’s the nucleus of families where beautiful memories are made.

Buying a home as soon as you can also allows you to begin paying down your mortgage so you will have your own place (completely paid-for) to live during retirement. Housing is the single largest expense for most seniors that causes a lot of stress during their golden years. Buying a home as early as possible means you will maximize the chances of being able to pay off your house before you leave the workforce for good.

Consider making home ownership one of your top financial goals. Even if you can’t buy a home just yet, start saving for the down payment in a sinking fund so you can afford to buy a nice home in the near future.

Start a side hustle or create multiple income streams

Your financial goals shouldn’t just be about spending and saving money. You should also make it a goal to actually make more money. You can do that by starting a side hustle. Even if your job feels secure and you love doing what you do, starting a side hustle or creating multiple income streams is a form of income security. For that reason alone, it needs to be on your list of top financial goals.

But there are more reasons why you should make this a serious goal: one of those income streams could be the part-time cash flow that enables you to retire at an early age. The extra cash flow from any additional income stream could be used to help fund your retirement savings. It could also be used to help you pay off your debt or take your dream vacation. Several income streams could provide you with an income portfolio, that means that you’re not dependent on a single source of income – ever!

There is no shortage of side hustle options to earn some extra money. Consider starting one that fits into your lifestyle. Increasing your income at your current job isn’t always a possibility. Instead of waiting for the next promotion and salary increase at your full-time job, you might want to do something now to make more money that will give you more financial freedom and flexibility.

Final thoughts

Money affects almost all facets of life. So, getting control of your finances is one of the best things that you can do to simplify your life. The first step is setting some realistic financial goals and having a concrete plan as to how you will achieve them. Once that plan is established, and working toward those goals becomes part of your habits, that will soon change your mindset and make your life so much simpler and more meaningful.