When you can pay your bills on time each month with money to save, you have more freedom to indulge in small luxuries. But to reach this level of financial freedom, you’ll need to set a few financial goals. Creating concrete and actionable money goals, such as proper budgeting or saving for retirement, will help elevate your life and allow you to enjoy the things you want to do.
Here are 5 financial goals to get started:
Best Ways to Save Money
Create an Emergency Fund
One of the best financial goals is to create an emergency fund. Life happens and random events like your car breaking down or a sudden medical bill can require you to come up with cash on the spot. An emergency fund can tide you over for any unexpected expenses.
The size of your emergency fund is generally recommended to be three to six months of living expenses. However, if you’re still paying off debt or you’re not able to save that much that quickly, it’s okay to start small. Even $1,000 in your emergency fund is enough to cover some unforeseen expenses.
Pay Off Your Debt
If you’re struggling with debt, paying it off as soon as possible should be one your first financial goals. To pay off your debt in a realistic timeframe, set a goal for yourself on how much or which debts you want to pay off by the end of the set timeframe (for instance, a year.) Use your budget to help you determine what you can realistically pay off. Once you’ve set your goal, determine how much money you’ll need to set aside each month in order to meet that goal.
Set a Budget - And Stick to It!
Setting a budget will not only help you plan how to build your emergency fund, but it’ll also help you reach your overall money goals. The key to budgeting is to make sure that you spend less than you earn so that you can pay off your debt and put any extra money into your savings. But in order to do that, you’ll need to make sure you’re setting a realistic budget for yourself that you can actually stick to.
Try to track your spending by writing down everything you spend for one month. Then you can identify which expenses are necessary and which ones you can eliminate or reduce. The more you stick to your budget, the faster you’ll be able to pay off your debt and increase your savings, and the faster you will be able to meet your financial goals.
Cut Monthly Spending
The common thread with all these financial goals is to cut or reduce spending wherever you can. Yes, this is the hardest part of budgeting, but it’s necessary to give yourself some extra cash to help you meet your money goals. Take a hard look at all your expenses and ask yourself what you can do without, at least in the short-term.
In addition to getting rid of expenses, you can also look at which expenses can be reduced without getting rid of them entirely. Can you call your internet provider and get switched to a less expensive plan? Prepare meals at home and limit eating out to special occasions? Cut those cable channels and stream the shows you want? If you’re willing to take the time to reexamine your expenses, you can cut spending and meet your money goals quicker.
Financially fit people are more than just mindful of their spending–they also set money goals for themselves and work diligently to achieve them. By setting these financial goals and taking small steps each day to work towards them, you can meet them in no time.
Start Saving for Retirement
Budgeting also helps you start saving for retirement, which is one of the best long-term financial goals you can have. It’s never too early (or late) to start saving for retirement. The earlier you begin to save, the more your savings will grow by the time you retire.
Many companies offer their full-time employees an opportunity to save for retirement through a 401k. If your job offers this, consider taking advantage of it. Through a 401k plan, your employer will take out a certain percentage of your paycheck (before taxes) and invest it into a 401k account on your behalf. Some companies may also match your contribution (or a portion of it) with their own contributions. If your company doesn’t offer a 401k plan, you can invest in a Roth IRA or Traditional IRA to get started saving for retirement.