What Is A Budget

What is a Budget?
Definition: A budget is a financial document used to project future income and expenses.
To put it simply, a budget plans future saving and spending as well as planned income and expenses.
Budgeting may be carried out by individuals or by companies to estimate whether or not they can
continue to operate with its projected income and expenses.
A budget can be drawn up for each financial year and contain information on the estimated value of
sales and value of costs. From this you can see how the coming accounting period is likely to end. The
actual performance of the business can be measured against this proposed plan.
Different budgets can be created depending on what particular aspect of the business requires focus.
See three popular kinds of budgeting plans below.
Forecast Budget
Forecast is usually recognized as an adjusted budget. Estimates are prepared for some time within the
year, when a part of the outcome is known. Preparing a forecast includes adding the results from
another period, and reporting those in the budget for the remainder of the year.
That way you get a more realistic picture of the outcome for the full year. Often you will additionally
adjust the budget in terms of already known budgetary deviations. This is called an adjusted forecast.
Performance Budget
It implies that one makes an assessment of expected income and expenses. Budgets are typically based
on its results for the corresponding period a year earlier (small firms). Many companies base their
budget on the outcome from the same period a year earlier. Each item is assessed as a percentage of
expected change.
Budgets are based on a specific project, utilization rate and number of employees (service). The bigger
the company gets, the harder it will be by simple means to create an overview of all events affecting the
year. Many service providers therefore choose to budget specific projects that are currently in the
company.
In addition, a budget may be created of anticipated projects. With an overview of the various projects,
budgets will then portray a picture of the expected revenue. Costs are usually calculated on the basis of
the previous year's results because costs are easier to predict in this way.
Budgets may also be based on the sum of each department within the company (little larger firms). One
can also base its budget on the various departments of the company. Often both income and expenses
are taking into account in each budget before creating an overview of its total budget.
Cash Budget
Equally important as an outcome budget is a cash budget. A cash budget covers a forecast for how the
cash is included in the company.
The cash flow budget is a prediction of future cash receipts and expenditures for a particular time
period. It usually covers a period in the short term future. The cash flow budget helps the business
determine when income will be sufficient to cover expenses and when the company will need to seek
outside financing.
A budget is a financial plan for a specified period.
It is an estimate of expenses a party will incur, usually broken out by category, for the purpose of
providing a roadmap that the party should follow.
Budgets can be for a person or for a business.
The former type of budget can be as easy as maintaining a daily tally of income and expenses.
The latter can be a relatively complex construction, depending on the business establishment or
company. Regardless of the budget type, the basic process to create one remains the same.
It consists of analyzing expenses and matching them to existing or future income sources.
While budgets are useful for individuals, they are necessary for larger entities such as corporations and
governments which require coordination between multiple people and initiatives. Budgets are essential
to goal setting.
These goals can be personal or professional.
Consider the case of an entrepreneur interested in opening a café. Before actually embarking on the
venture, she would need to create a budget.
This budget will have entries for her estimates about spending on equipment, furniture and other
expenses.
Those entries are balanced by future income estimates to determine a breakeven time horizon for her
investments.
A corporate budget is an encapsulation of a company’s financial position at a specific point in time. It is

used to plan future money outlays for various activities within an organization.
It also determines future income because these activities are meant to boost sales.
The variance between estimated and actual spending helps establish a baseline for company
performance
Creating a Budget
Budgeting on an individual level can be as simple as tracking all sources of income and expenses, then
making sure that more money is coming in than is going out.
For more detailed budgeting, you can plan your needs and wants based on your estimated income or
the amount you expect to earn over the course of the budget’s time period.
Your needs are the absolute essential items that cannot escape spending. For example, rent and electric
bills are budgetary needs because you need a shelter over your head and electricity in your home.
Grocery spending is also an essential item because food is a basic necessity of life.
Thus, spending on needs is non-negotiable, meaning you cannot not choose to spend on them.
Wants, on the other hand, are optional items. You have a choice as far as spending on wants is
concerned.
For example, you have the choice of spending on new clothing or electronics.
They are not necessary for survival.
After you have identified your needs and wants, choose the budgeting method that you will employ to
estimate and keep track of your expenses.
Popular Budgeting Methods
Popular budgeting methods include incremental budgeting, activity-based budgeting, and zero-based
budgeting. Each of these methods has its pros and cons.
For example, incremental budgeting is useful in situations where both income and expenses increase by
a predictable amount each year.
On the other hand, zero-based budgeting can be useful to cut down on costs because each line item
spending in this budgeting method requires justification.
The process to craft a business budget is similar to the one for personal budgets in that it requires
collecting information about estimates for spending and expenses.
However, because companies have multiple needs and wants at the same time, a business budget has
many components.
Some of the line items that you can expect to see in a business budget are as follows:
Some Items in a Business Budget
Estimated revenue or amount of money that you can expect to make from the products that you
manufacture.
Fixed costs or the costs that are related to operations, such as real estate costs.
Variable costs or the costs that fluctuate in a business. For example, supplier and inventory costs are
considered variable costs.
One-time expenses, such as costs associated with purchasing or installing a large piece of machinery on
the factory floor or costs related to settling a legal matter.
Creating a business budget begins by making some assumptions and financial projections about the
upcoming period.
These include estimations of sales trends (or income), cost trends (or expenses), and the overall outlook
of the market for the particular industry or sector.
Businesses create both sales and expense budget. Each of these budgets gets compiled into a master
budget.
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Creating a personal budget
Creating and Using a Budget

Creating and using a budget is something everyone can benefit from and do. Budgeting is a powerful
process that can help you develop a financial plan and build financial capability and empowerment.
What is your perspective on budgeting?
Your success with budgeting may depend on your perspective. Some think budgets are meant to be
restrictive, take the fun out of life, and make you feel shameful about spending. Others may view
budgets as too time consuming to make or too difficult to follow.
In reality, budgeting is an empowering process. It puts you in control of directing your money towards
what you really want in life, including having fun. With this in mind, taking the time to create a realistic
budget you can follow will be well worth it.
What is a budget? What is the budgeting process?
A budget is a written plan for how you will spend and save your income each month. Budgeting
includes:
Identifying your priorities and goals
Creating a budget document that outlines your estimated monthly income and expenses
Tracking your actual spending and income
Making adjustments to the plan
Why budget? Budgeting helps to:
Put you in control of your money and ensure it is being used to meet your needs and achieve your goals
Show you where your money is going and reduce wasteful spending
Improve your ability to pay all of your bills and not run out of money during the month
Free up money to pay down debt
Save for things you really want
Reduce stress and build confidence
Better prepare for emergencies
Five simple steps to create and use a budget
Creating and using a budget can be simple. Follow these steps to build and use a budget that works for
you. This budget tool may be useful in creating your budget.
Step 1: Estimate your monthly income
List your sources of income and how much you expect to receive on a monthly basis. Income
sources may include your paychecks, child support, pay from gig work, Social Security
income, etc. If your paycheck amounts differ each period, estimate conservatively to set
yourself up for success. Let's use an example:
Source of income may include:
interest on investments, dividends
proceeds from sale of assets
social security benefits, pensions, allowances, child assistance
wages, commission, bonuses, tips
Income
Paycheck 1 $1,500
Paycheck 2 $1,500
Total estimated monthly income $3,000
Step 2: Identify and estimate your monthly expenses
What do you spend your money on? Start by estimating your fixed expenses, which are those that are
the same amount each month. Your rent or mortgage, cell phone bill, and garbage bill may be examples
of fixed expenses. List each expense and how much it costs. Next, identify your variable expenses, which
are those with different dollar amounts each month. Groceries, eating out, gifts, clothes, and gas are
examples of these types of expenses. Estimate how much you spend on these each month. Looking at
past credit card or bank statements can help you to accurately estimate amounts. Don't forget to budget
for expenses you may pay annually. To budget for these, divide the expense by 12, then put aside that
amount each month. When finished, calculate your total estimated monthly expenses. See the example
below.
Fixed expenses May include but not limited to;

fees:
school and university fees
bank fees
insurance
loan repayments (if loan is based upon fixed interest rates) such as:
personal loans
car loans
credit card debts
Higher Education Contribution Scheme
public transport
rent
subscriptions to:
magazines
newspapers
clubs
travel including public transport, petrol
Variable expenses May include but not limited to;

car maintenance
living expenses such as:
food
clothing
medical
loan repayments if loan is based upon variable interest rates
miscellaneous expenses such as:
gifts
recreation
entertainment
fines
mobile telephone
mortgage repayments
utilities such as:
water
gas
electricity
telephone
Expenses
Fixed Expenses
Rent $1,400
Cell phone $100
Garbage $50
Car Insurance $200
Variable Expenses
Groceries $400
Eating out $100
Clothes $100
Gas $200
Gifts $150
Total estimated expenses $2,700
Step 3: Compare your total estimated income and expenses, and consider your priorities and goals
Now, compare your total estimated income to your total estimated expenses. If your expected monthly
income is greater than your expected monthly expenses, you expect a surplus. That's great! In the
example above, the person expects to receive $3,000 and spend $2,700 each month. There is an
expected surplus of $300 per month.
This is a good time to discuss financial priorities and goals. What are the things you want to achieve with
money – to save or invest for? Budgeting is exciting when you are able to maximize the amount you
direct towards your goals and can see yourself making progress. Short-term goals to save for may
include building an emergency fund or saving for a vacation. Long-term goals may include saving for a
home or investing for retirement.
Once you have determined your goals and priorities, consider how much you will direct to those goals
on a monthly basis. In the example above, the person decides to save $100 each month to add to an
emergency fund. The person also chooses to contribute $200 a month to an investment account. Ideally,
work to save and invest 10 percent to 20 percent of your monthly income. In the example, the person is
planning to save/invest 10 percent a month ($300/$3,000 = 10 percent).
If you expect your expenses to be greater than your income, you expect a deficit. To address this, you
will either need to reduce your estimated expenses or increase your expected income. Make decisions
that will bring your budget into balance. For example, can you find a way to spend less on groceries or
entertainment each month? Or, can you get a second job to earn more money?
Step 4: Track your spending, and at the end of month, see if you spent what you planned
Devise a system to record your spending for the month to see if you are staying within your budget. At
the end of the month, use the data to adjust your budget or adjust your future spending. Did you have
spending leaks you did not account for? Do you need to create a new budget category? Do you need to
adjust the amount you budget for certain expenses? Do you need to cut back on some expenses? Did
you meet your savings goals?
Budgets should be adjusted over time. Ask yourself, “Am I spending and saving my money in the way I
truly want to?" “Am I meeting my needs and working to achieve my goals?" If you have more unspent
money on a monthly basis, consider how to adjust your budget to redirect this money to achieve more
goals or to achieve goals sooner than expected.
Step 5: Stick with it ማጥበቅ
Tracking spending, plugging spending leaks, adjusting your budget, and saving money becomes a habit
over time. Set yourself up for success by:
Setting realistic and achievable expectations and goals
Creating a budget and tracking system that is easy to use and maintain
Automating saving and investing by setting up recurring transfers to savings or investment accounts
Using strategies to reduce impulse purchases and build self-discipline
Why is budgeting important?
Budgeting is not only useful for individuals who struggle financially. A budget is a stepping stone to your
financial goals. It allows you to live within your means and derive maximum benefits from available
resources. Budgeting can help as below:
Financial Awareness: Budgeting helps to understand your relationship with money. With a budget, you
know about your income, spending scope, and saving opportunities. Regular tracking helps to spot
patterns and make changes if required. Ultimately, budgeting helps avoid frivolous expenses and
inculcates financial discipline.
Emergencies: An ideal budget earmarks funds for an emergency and plans for goals like retirement or
vacation. Flexible budgets allow you to organize allocation based on your immediate needs.
Reduce Debt Exposure: A budget helps you to map out expenses and reduces overspending. In effect, it
limits or eliminates exposure to debt or credit facilities.
Relieves Stress: Formulating a budget and adhering to it ensures financial independence. While
budgeting is not a cure-all, it helps you manage financial decisions and prepare for challenges.
Reorganize Expenses: Budgeting helps to forecast those months with tight finances and ones with extra
liquidity. To ensure manageable and smooth finances, you may adopt methods to even out the highs
and lows in a budget.
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4 Reasons Why Budgeting Is Important In Personal Finance

Budgeting is a great tool for managing your finances. Here's why.
Aishwarya Rajgopal
14 Oct 2022, 5:07 PM IST
14 Oct 2022, 5:07 PM IST
<div class="paragraphs"><p>Source: Drazen Zigic on Freepik</p></div>
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Setting a budget is the first and most important step in personal finance management. However, most of
us may be reluctant to take this step as we usually tend to associate budgeting with restrictions.
However, budgeting is necessary as it will help you save your money and tell you exactly how much you
can spend, so you can make the most of your hard-earned money.
In this article, we will discuss the four reasons why budgeting is important while planning your personal
finance. But first, let us understand the meaning of budgeting.
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What is Budgeting?
Budgeting is the process of creating a financial plan for your money. A budget is a detailed plan that will
help you decide how you can spend, save, and invest your money. With a budget, you can plan for
important financial decisions and easily cover your expenses. Following a budget consistently will help
you take control of your finances and build wealth over the long run.
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Why Is Budgeting Important In Personal Finance Management?

Budgeting is a powerful tool that allows you to decide where you should spend your money and how
much you can spend. With a budget, you can ensure that every single rupee that you have earned is
being used the way you want it and track your progress.
Let us take a look at the four reasons why planning and budgeting is important while planning your
personal finances:
#1 Budgeting Helps Avoid Overspending
Spending your money mindlessly can lead to spending more than you should, especially if you use any
credit card or credit apps. This will eventually reduce your spending power in the future, as most of your
earnings will go into debt repayments.
By setting a budget for your monthly expenses, you will be aware of how much you are earning vs the
amount you are spending every month and will be in a better position to decide when you should stop
spending.
Also Read: The Credit Card And Personal Loan Debt Trap...
#2 Budgeting Helps You Achieve Your Financial Goals
A budget will help you focus on saving your money for your financial goals. These could include saving
for your dream home, building an education fund for your child, starting your own business, etc. With a
budget, you can create a plan for each goal and track it periodically.
#3 Budgeting Makes Saving Easier
When you follow a budget, you will assign a set amount/percentage of your earnings for specific goals
and can transfer this amount to a savings or investment account every month. This way you will be less
likely to use this amount for any expenses.
#4 Budgeting Helps You Gain Control
Budgeting puts you in control of your finances. Having a financial plan helps you prioritise your
spending, track your progress, and make changes whenever required. A budget is a great tool that will
aid in setting a strong financial future.
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Financial Goals Examples and Tips
MELINDA OPPERMAN MONEY PERSONAL FINANCE
When it comes to personal finance, everyone’s situation is unique. No one has the same bills, rent,
debts, or lifestyle. When you’re ready to take control of your financial lifestyle, you need a plan that will
answer your specific problems, not your neighbor’s.
At credit.org, our trained coaches are ready to review your unique situation and help you plan your path
to financial freedom. The first step to tackling these problems is to define your financial goals.
What is a Financial Goal?
A financial goal is a target to aim for when managing your money. It can involve saving, spending,
earning, or even investing.
Creating a list of financial goals is vital to creating a budget. When you have a clear picture of what
you’re aiming for, working towards your target is easy. That means that your goals should be
measurable, specific, and time-oriented.
Types of Financial Goals
There are several types of financial goals:

Short-term goals
Mid-term goals
Long-term goals
Short-term financial goals
These are smaller financial targets that can be reached within a year. This includes things like a new
television, computer, or family vacation.
Mid-term financial goals
Typically, mid-term goals take about five years to achieve. A little more expensive than an everyday goal,
they are still achievable with discipline and hard work. Paying off a credit card balance, a loan, or saving
for a down payment on a car are all mid-term goals.
Long-term financial goals
This type of goal usually takes much more than 5 years to achieve. Some examples of long-term goals
are saving for a college education, retirement, or a new home.
7 Examples of Personal Finance Goals
Still not sure what to aim for? Here are some personal financial goal examples to help get you started.
1. Start an Emergency Fund
Life is unpredictable, and it’s important to be prepared. Saving for emergencies is one of the only goals
that is a necessity. It should be the first one you should set, regardless of your situation.
It’s up to you to decide what qualifies as an emergency. There are a lot of different situations that can
fall into this category, including:
Medical expenses
Job loss
Accidents
Broken appliances
Car repair
When something unexpected and expensive occurs, emergency funds are there to keep you from
suffering the financial blow.
How much you save toward an emergency will vary. Statistically, it takes 9 months on average to find a
new job after a layoff. With this in mind, it is in your best interest to save roughly 9 months’ worth of
income for emergencies.
2. Pay Off Debt
Paying off debts is one of the most common financial goals. No one feels comfortable knowing that they
owe large sums of money. And because the amount you owe is already a specific number, paying off
debt can easily be translated into a financial goal.
In addition to making every monthly payment, the best way to make real progress is to stop borrowing.
Adding to your debt will only push you away from your goal, so it’s important to stay strong and diligent.
In some cases, this goal is probably a mid-term goal, but there are ways to get out of debt fast.
3. Save for Retirement
Saving for retirement is a goal you may be working towards your entire life. It is the perfect example of a
long-term investment.
It is important to consider exactly what your retirement needs are. Setting up a 401(k) or another
retirement plan is the most lucrative way to save for your future. Remember, the earlier you start, the
better off you’ll be in the end.
4. Strive for Homeownership

Buying a home is a common long-term financial goal. Whether you’re saving for a down payment or
working to pay off a mortgage, homeownership is one of the largest financial targets to aim for.
Saving up a sizeable down payment is the best way to get a reasonable home loan. And if you save
enough, you can avoid the cost of Private Mortgage Insurance, which will save you even more money.
5. Pay Off the Car
Having a monthly car payment is not a staple in life. A great example of a mid-term goal is paying off a
car loan. While somewhat sizable, paying off the balance should only take a few years.
Once you’ve completed paying off your auto loan, don’t run straight back to the dealership. Take the
opportunity to use those loan payments for other bills or savings. You’ve already finished one debt –
there’s no reason to hop into another loan right away. It’s important to know the best time to sell or
trade in your car to make the most of your investment.
Continue to drive your old car until you have a sizable down payment for the next one. Make it your goal
to pay for your next car in full, without borrowing at all.
6. Invest in a College Education
Unfortunately, due to the increasing cost of college, paying off student loans has become a modern
long-term goal. Whether you’re a student paying off your own balance or a parent saving for your child’s
education, college tuition is easily a substantial goal to base your budget on.
7. Plan for Fun
While most financial goals are oriented around being responsible, you should always try to aim for one
“fun” goal. This could be a vacation, a big-screen TV, a boat or any other unnecessary thing that you
simply want.
If you work hard and save diligently, you deserve to reward yourself with fun savings goals. Plus,
working towards something you truly want is a great way to practice self-discipline and goal setting.
Need Help Defining Your Financial Goals?
No matter what your financial situation is, our expert coaches are ready to help you reach your goals.
Contact us today and start your path to financial freedom.
Speak to our certified Financial Coaches to review all of your options and discuss best strategies for
getting out of debt.
Goals are important in life. They give you the energy and motivation to do extraordinary things. So, what
are financial goals? A financial goal can change your perspective about life and money. You will start
evaluating your everyday decisions in greater detail.
For example, you may not find anything unusual in spending Rs. 25 on the cheapest, regular coffee in
the neighbourhood coffee shop. If you are habituated to having such coffees four times a week, you end
up spending Rs. 100 each week.
On the face of it, this amount may look small. But if you invest that Rs. 100 each week (or Rs. 400 each
month) even in a simple debt instrument (ROI 6% p.a.), your coffee money can grow to Rs. 28,000 in 5
years and nearly Rs. 4 Lakhs in 30 years. This goal can now help you decide each time you get tempted
to hang around in that coffee shop. Now, imagine if you save Rs 4000 instead of Rs 400 per month.
Recommended Reading - How to Manage Money?
What are Financial Goals?
A financial goal is a scientifically defined financial milestone that you plan to achieve or reach. Financial
goals comprise earning, saving, investing and spending in proportions that match your short-term,
medium-term or long-term plans. Every financial goal will have the following three details associated
with them:
- What is the purpose?

- How much money is needed?
- How much time? (usually in years)
Emergency funds, retirement corpus, home purchase, car ownership, debt clearance etc are all
examples of financial goals.
Although you can have a wide variety of goals, you can broadly classify each of these goals within a
specific time frame so that your priorities become clear. Categorizing as per time frame helps you
visualize the goals and pace yourself accordingly. To ensure your life is planned and on track, you must
focus on putting clear timelines when setting goals. This will make you more productive and effective.
Here are 3 types of goals:
a) Short-Term Goals
Short-term goals are something you want to achieve in the foreseeable future over the next few
months. These are required for your more immediate expenses. These expenses are generally smaller in
scope and easier to project and predict.
b) Medium-Term Goals
Medium Term lies between short term and long term. Short-term goals have a typical timeline of a year
whereas long-term goals are planned for a decade or more. You may have to achieve a series of short-
term goals to reach your medium-term goals. Clearing outstanding dues on your credit card or personal
loan can be classified under medium-term goals.
Medium-term goals are critical for evaluating your progress against your long-term goals. You can check
whether you are headed in the right direction.
c) Long-Term Goals
Long-term goals require more deliberation, and in most cases, money. Retirement, buying a house, and
funding a child’s higher education are typical long-term goals.
Examples of Financial Goals
Life is full of financial goals. It becomes easier if you know all your goals and works towards them.
Financial goals are better in this aspect as you can simply put your money to work and achieve them.
Here are some of the common financial goals:
a) Emergency Fund
Emergencies don’t come with a notice of warning. Damage to house or equipment, illness, accidents etc
can strike anytime and need cash in hand immediately. Keeping all money in illiquid assets such as land,
bonds, etc will not help. Setting aside some money in savings accounts, FDs that can be withdrawn
quickly can be useful in building your emergency kitty.
b) Retirement
Retirement planning should begin as soon as one starts earning. If you have a longer runway, you can
save smaller amounts each month, yet reach your targeted retirement kitty. When you have a particular
amount (calculated rationally using projected expenses, income, etc), as a goal, you will get into the
groove of saving for it in a disciplined and sustainable manner.
Benefits of Early Retirement Planning
c) Buying a House
If you aspire to own a house, you must have a clear vision of the projected cost. A clear milestone can
help you work backwards. For example, if you want to buy a 3BHK flat when you turn 35, estimate the
cost and start saving for it. Even if you plan to avail a home loan, you will have to make some down
payment and bear incidental expenses.
Even in the best-case scenario, presuming the financer covers 90%-100% of the expenses, you will have
to plan to set aside money each month for EMIs. This implies you should not pick up other debts now or
clear outstanding debts before you get there.
d) Child’s Higher Education

Quality education comes at a cost and this cost is increasing by the day, due to inflation and rising
demand. Having a goal to reach a specific amount by the time your child turns 15 or 18 will help you
build discipline in your savings.
e) Vacation
No, you don’t have to sacrifice your breaks and vacations. If you feel energized, rejuvenated and
refreshed after a break, go for it. Even the old adage supports this. All work and no play makes Jack/Jill a
dull boy/girl! What is important is to plan this well in advance instead of making it an impulsive decision.
f) Upgrade/Buy a New Car
Upgrading or replacing your car will be a lot easier if you plan it ahead. This is relatively easy because
you know when you purchased your car. Even if you retain the car for the legally permissible tenure of
15 years, you know well in advance about the time to upgrade or replace your car.
If you currently ride a bike but plan to buy a car when you get married or have a child, say in 3 years,
plan accordingly.
Buying things on loan is quicker but almost always more expensive. For example, paying Rs 12.4 lakhs
for a car with an on-road price of Rs 10 lakhs. The bigger and longer the loan the higher your cost.
However, look at replacing the unplanned loan with a planned purchase and you can make more money
or even buy a better car (or any other asset).
How to Prioritise your Financial Goals for Investment?
Make a list of your NEEDS Vs WANTS. Needs are essential whereas Wants are good-to-have. You cannot
compromise much on Needs because those may be essential for survival and well-being. Even within
Needs, list out expensive items separately. You can classify both expensive and inexpensive items under
different timelines so that you can pace your investments accordingly.
Urgent-Important Matrix for Goal Prioritization

Ranking each item within the urgent-important matrix will give you further clarity on where your money
should flow. Once this matrix is ready, look at your budget and start saving for the priority items in each
bucket.
Financial Goals help Investment Success
When you have defined financial goals selecting appropriate investments becomes easy. For example,
child education goals are best fulfilled with a child insurance plan. Then you can choose based on your
risk appetite:
a) Guaranteed Savings Plan, if you want a fixed rate of return on your investments
b) Child ULIP Plan: If you can tolerate a little market variation or whether you are aggressive enough for
equity exposure
Similarly, retirement plans will be an easy choice, for a defined goal. Retirement goals are often defined
as a % of the income you will save. So, for example, if your annual income is Rs 10 lakhs, and your
retirement need is 15% of your income, you can allocate a total of Rs 12,500 per month into:
a) Invest 4G ULIP plan for 99 years
b) National Pension Scheme or Public Provident Fund
Planning and knowing your investment goals gives you an edge with investments. Proper and disciplined
investments are the path to a prosperous future.
Also learn about - What is an SIP Investment?
Disclaimer: This article is issued in the general public interest and meant for general information
purposes only. Readers are advised to exercise their caution and not to rely on the contents of the
article as conclusive in nature. Readers should research further or consult an expert in this regard.
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University Saving Plan Guaranteed Savings Plan Guaranteed Income4Life Plan
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Personal Growth
How to Set Financial Goals
12 MIN READ | DEC 22, 2022
Rachel Cruze
By Rachel Cruze
Do you feel like you’re trying so hard to make the right decisions with your money but you can never
seem to get ahead? Or have you been working your butt off, but you don’t have much to show for it at
the end of the month?
Yeah, things like inflation and recession are real and can feel like huge obstacles. But if you don’t set any
goals for your money, you’ll probably still feel like you’re spinning your wheels—even when the
economy isn’t crazy.
If you want to finally make progress with your money, you need to set some financial goals. Don’t worry,
it’s not as complicated as it sounds. I’ll walk you through how to set financial goals step by step.
What Is a Financial Goal?
A financial goal is any plan you have for your money. You can have short-term financial goals (like saving
up $1,000) or long-term financial goals (like investing for retirement). You should set goals for every area
of your life, but having specific financial goals helps you literally put your money where your goal is.
And I can’t talk about financial goals without talking about the Baby Steps. Trying to decide what to do
with your money can feel as overwhelming as choosing what to watch on Netflix. There are so many
options, and everyone’s got an opinion.
Should you pay off debt? Save for your kids’ college? Buy a house? Invest for retirement? The 7 Baby
Steps cuts through all the confusion and gives you a clear path to do all those things! It helps you focus
on one goal at a time—so you can make more progress with your money and have financial peace.
So, if you have no clue what financial goal to go after first, start by taking this quick assessment to find
out what Baby Step you’re on.
5 Steps to Setting Financial Goals
1. Make your goal specific.
One reason people fail to meet their goals is because they set goals that are too vague. You might say, “I
want to be better with money.” But what does that actually mean to you? Narrow it down!
What if you decide instead to tackle your debt? That’s a specific area of your money to focus on. Now,
let’s talk about how to break this goal down even more.
2. Make your goal measurable.
Okay, so you want to pay off debt. Now it’s time to pick an exact amount—something you can measure
to know if you hit your goal or not.
While being completely debt-free should be your ultimate goal (that’s Baby Step 2), it’s a good idea to
break down that goal into smaller chunks. That way, you won’t feel too defeated before you even start.
So, maybe you have $30,000 of total debt, but you want to start by paying off a $15,000 student loan
first. Hey, that’s a measurable goal!
3. Give yourself a deadline.
Here’s the deal: It’s super tempting to procrastinate on your goals if they aren’t time-sensitive. Author
Benny Lewis says, “There are seven days in a week, and ‘someday’ is not one of them.” Stop saying
someday. You need to give yourself a deadline and make it reasonable—but also a little challenging.
Back to the student loan example: When do you want to hit your goal? If you want to pay off $15,000 in
one year, that means you’ll need to pay $1,250 each month. Is this possible but also a bit of a stretch? If
so, good!
4. Make sure they’re your own goals.
Let’s talk about comparison for a moment. It’s easy to look around at what other people are doing and
feel like you should be doing it too. Are your neighbors driving the latest model cars? Is that one girl on
Instagram always taking extravagant vacations? Hey, good for them! But that doesn’t mean you need to
do the same.
Get a FREE customized plan for your money in 3 minutes!
When we compare ourselves to other people, we’re playing a game we’ll never win. So, make sure
you’re setting financial goals that make sense for you. In other words, just because all your friends are
taking out second mortgages for renovated kitchens, doesn’t mean you should. Put the blinders on,
focus on your lane, and cross your own finish line. And be clear on why you’ve chosen the goals you
have.
5. Write your goal down.
Did you know you’re more likely to achieve your goals if you write them down? Yep, it’s true—there’s
something about putting pen to paper that helps you commit to the task at hand.
So, go ahead and put your goals in writing. Then, stick them in your car, to your desk, or on your
bathroom mirror. Type them in the Notes app on your phone, take a screenshot, and set it as your
wallpaper so it’s the first thing you see when you pick up your phone. Keeping your goals where you can
look at them will keep you on track and motivated.
5 Common Financial Goals
With so much money “advice” floating around, it can be hard to know which financial goals are right for
you. Like I said before, start with the Baby Steps to figure out your big-picture money goals. But there
are also smaller goals that can help you hit those milestones.
Here are some of the most common financial goals people set and tips on how to make them happen.
1. Create and stick to a budget.
Not only is budgeting one of the top financial goals people set each new year, but it’s also the
foundation you should build all your other money goals on.
A budget is how you make progress with your money. It’s a plan for what’s coming in (your income) and
what’s going out (your expenses). You’re telling your money where to go, instead of wondering where it
went. So you can feel confident you’re taking steps toward your goal every month.
Budgeting helps you gain momentum in every area of your finances. If you’re already budgeting, bravo!
If not, get started for free with EveryDollar.
2. Build up an emergency fund.
Life happens. But you can be prepared for any money problems that come your way if you’ve got
enough money saved up. I’m talking car trouble, medical expenses and busted toilets (you know, some
of the worst parts of being an adult). But when you’ve got an emergency fund, you can rest well at night
knowing you won’t have to go into debt to cover those moments.
Start with the financial goal of having $1,000 in savings. Then, if you have debt, it’s time to knock that
out. (I’ll talk more about that in a minute.) After that, you want to build up a fully funded emergency
fund with 3–6 months of expenses. (Again, this is all covered in the Baby Steps—the proven plan to help
you take control of your money.)
When you’ve got an emergency fund, you’re ready for those “life happens” moments. Instead of being
worried about what could happen next, you’ll feel confident that you’ve got money set aside to deal
with it.
3. Get out of debt.
If you’ve got debt, it’s time to get serious about paying it off. All of it. Yeah, I know that may seem
impossible right now, especially if you’ve got some big numbers staring you in the face. But listen, debt
doesn’t move you forward— it holds you back. You can’t get ahead with your money if it’s always going
to payments.
If you want to free up more money to use toward your goals, check out Financial Peace University (FPU).
This course will show you exactly how to ditch debt for good and work your way through the Baby Steps.
4. Save up for your retirement dreams.
Take a moment to imagine your ideal retirement. Do you want to pack up the grandkids and head to
Disney every Christmas? Visit a new state with your spouse once a quarter? Read every book on your
shelves? Take up a fun hobby?
No matter what you’re dreaming of for the future, you’ll need good retirement investments now to
make it a reality. So, once you’re debt-free and have that fully funded emergency fund, I want you to
start investing 15% of your household income for retirement. And guess what? When you have zero
debt, all that money you were sending to payments is now investment fuel for your retirement dreams!
5. Spend less and save more.
Tons of people throw out the goal of “I want to spend less” or “I want to save more” without thinking
about what it means to actually do those things. But you’ve got to be intentional about your money
habits.
Create and stick to your budget every month, find deals, use coupons, pay cash. And here’s a big one:
Learn how to say no—even to yourself! I’m not saying you should never have fun. But if you want to
save money, it’s going to take some planning and lifestyle adjusting.
And finally, here’s one of my favorite tips for spending less and saving more: Plan your meals! Food is
where most Americans overspend, and meal planning is how you rein that in. Check out my free Weekly
Meal Planner and Grocery Savings Guide to see how to save time and money on food.
An Example of a Financial Goal in Action

Okay, so now that I’ve gone over the basics of financial goal planning, let me give you an example of
how this can work in real life.
A while back, my husband, Winston, and I decided to build a house. Before that, any extra income we
brought in went straight to our general savings. But I knew building a house would cost a lot, and
random expenses were bound to pop up during the process.
So, we made it a goal to save up as much as we could—specifically toward our house. And while saving
up that much money seemed almost impossible, breaking it down into monthly goals gave us so much
momentum. Having a plan for our money not only made our dream possible, but it also made the
process fun!
It’s also what kept my spending tendencies (aka spendencies—trust me, it’s a thing) in check. Knowing
my money was going toward something that I really wanted motivated me to spend less. And even
though there were moments when we felt fatigued—I mean, there were some days when all I wanted to
do was relax and spend money—finding creative ways to hit our goal faster kept us on track each
month.
Beyond that, it was character-building. It’s a time in our marriage that we’ll always be able to look back
on and know we accomplished something hard together. It helped cultivate connection between us and
contentment in my own heart. Now I realize those benefits of the process are worth more than the new
house.
Why Is Setting Financial Goals Important?
Having a goal helps you be more future-minded with your money. You’ll start to see how every decision
you make adds up and matters to your overall financial health.
For example, if you don’t have financial goals, it’s no big deal to buy breakfast and coffee every day. But
let’s look at just how much that’s really costing you. You’ll typically spend at least $25 for just one
workweek of lattes—that’s $100 a month! What else could you do with that money?
If you put $100 in an investment account every month for five years, your latte fund could grow into
more than $8,000, thanks to the power of compound interest. That’s a whole semester of your kids’
college you’re drinking!
Imagine if you thought even more long term and invested $100 a month for 15 years. Your latte savings
could grow to over $45,000.
And if you invest your savings for 30 years? Your coffee money could grow to over $280,000. A latte a
day or a quarter of a million dollars? You guys, I like a good cup of coffee but not that much.
If you want to set yourself up to be financially secure, find small (or large) sacrifices you can make right
now. The everyday things you do with your money today will impact your future.
lattes vs investing
Goals Will Get You Where You Want to Be
Financial goals will help you change your mindset, your habits and ultimately your life.
When you’re intentional with every dollar you have, you’re able to make your money go further. That
means you get to do more of the stuff you want to do and plan for the things you’ll do in the future.
You can do more than you ever thought possible, but you’re going to need some financial goals to help
you get there. Decide what you want your future to look like and figure out what you need to do today
to make it happen.
You can live on your terms instead of the bank’s.
You can get out of debt once and for all.

You can build wealth and pay for things that matter to you.
There are lots of things that influence the way you set your financial goals: Your life growing up, your
motivations, and your own dreams for the future are just a few. If you want to better understand why
you handle money the way you do, and what to do about it, check out my book Know Yourself, Know
Your Money. It gets to the root of your specific money tendencies to help you take control of your
money and reach your financial goals faster.
And remember, it all starts with a budget. This is the foundation. It’s the plan. And it’s how you get
intentional with your money. Go ahead and start your free budget today with EveryDollar. Then, get
moving on those five steps to setting and reaching your financial goals. No matter the time of year, you
can turn these dreams into reality. Go get it!
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Rachel Cruze
ABOUT THE AUTHOR
Rachel Cruze
Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze
Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-
host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly
listeners with her personal finance advice. She has appeared on Good Morning America and Fox News
and has been featured in publications such as Time, Real Simple and Women’s Health magazines.
Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways
to take control of your money and create a life you love. Learn More.
More Articles From Rachel
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What is Budget? What are its characteristics?

A budget is a financial document or an action plan which is prepared and used to project future income
and expenses. It outlines an organisation’s financial and operational goals. It can also include non-
monetary information with the monetary information. They need to be made and approved in advance
of the year in which they are to be used or implemented.
Following are the characteristics of a good budget:
- It is expressed in quantitative or monetary terms.
- It is prepared for a fixed period of time It is prepared before the period in which it commences.
- Practical to implement.
- It spells out the objects and the policies to be pursued in order to achieve the objective of the
organisation.
- Many people are involved in drawing up a budget.
- Flexible enough to allow changes in the changing environment.
- Prepared on the basis of established standards of performance.
- Analysis of cost and revenues.
- On the basis of budget report performance of the organisation is constantly monitored.

5. Pay Off the Car
7. Plan for Fun
simply want.
When it comes to personal finance, everyone’s situation is unique. No one has the same bills, rent,
debts, or lifestyle. When you’re ready to take control of your financial lifestyle, you need a plan that will
answer your specific problems, not your neighbor’s.
At credit.org, our trained coaches are ready to review your unique situation and help you plan your path
to financial freedom. The first step to tackling these problems is to define your financial goals.
What is a Financial Goal?

A financial goal is a target to aim for when managing your money. It can involve saving, spending,
earning, or even investing.
Creating a list of financial goals is vital to creating a budget. When you have a clear picture of what
you’re aiming for, working towards your target is easy. That means that your goals should be
measurable, specific, and time-oriented.
There are several types of financial goals:
Short-term goals
Mid-term goals
Long-term goals
Short-term financial goals
These are smaller financial targets that can be reached within a year. This includes things like a new
television, computer, or family vacation.
Mid-term financial goals
Typically, mid-term goals take about five years to achieve. A little more expensive than an everyday goal,
they are still achievable with discipline and hard work. Paying off a credit card balance, a loan, or saving
for a down payment on a car are all mid-term goals.
Long-term financial goals
This type of goal usually takes much more than 5 years to achieve. Some examples of long-term goals
are saving for a college education, retirement, or a new home.
7 Examples of Personal Finance Goals
Still not sure what to aim for? Here are some personal financial goal examples to help get you started.
1. Start an Emergency Fund
Life is unpredictable, and it’s important to be prepared. Saving for emergencies is one of the only goals
that is a necessity. It should be the first one you should set, regardless of your situation.
It’s up to you to decide what qualifies as an emergency. There are a lot of different situations that can
fall into this category, including:
Medical expenses
Job loss
Accidents
Broken appliances
Car repair
When something unexpected and expensive occurs, emergency funds are there to keep you from
suffering the financial blow.
How much you save toward an emergency will vary. Statistically, it takes 9 months on average to find a
new job after a layoff. With this in mind, it is in your best interest to save roughly 9 months’ worth of
income for emergencies.
2. Pay Off Debt
Paying off debts is one of the most common financial goals. No one feels comfortable knowing that they
owe large sums of money. And because the amount you owe is already a specific number, paying off
debt can easily be translated into a financial goal.
In addition to making every monthly payment, the best way to make real progress is to stop borrowing.
Adding to your debt will only push you away from your goal, so it’s important to stay strong and diligent.
In some cases, this goal is probably a mid-term goal, but there are ways to get out of debt fast.
3. Save for Retirement
5. Pay Off the Car
7. Plan for Fun
simply want.
What is a good financial goal?
A good financial goal should be SMART. It should be specific, measurable, attainable, achievable,
realistic, and time-bound. SMART financial goals tend to find more success.
What are the benefits of setting financial goals?
Establishing financial goals is a critical step toward success, stability, and security.
When you decide how you’re going to manage your money in order to achieve the life you want, you
begin to align your actions with your goals. This is how you set your life in motion toward a specific
outcome.
Life goals, in general, benefit your life by creating focus, motivation, and confidence. But, when you
include defined financial objectives in your life plan, you set yourself up for successful outcomes that
benefit several areas of your life.
Here are 9 benefits of setting financial goals:
You can create an effective action plan for your finances
You can choose appropriate strategies
You can measure your progress
You know what your priorities are
You strengthen your motivation and commitment
You increase your chances of experiencing positive outcomes
You create built-in accountability
You improve your money mindset
You have hope and confidence in your future
All of these benefits create powerful change in your life, and they will inspire you to make financial
decisions that move you closer to your larger goals.
Let’s go over each one in detail.
#1 Financial goals guide your planning

Having a standard to measure yourself against creates the awareness to self-evaluate and self-correct
when necessary. Knowing when and what to change in your financial plan is critical to achieving your
goals on time.
Also, seeing how far you’ve come and how much closer you are to your goals is a great way to boost
motivation.
#4 Financial goals help you focus on your priorities
closer you are to your goals is a great way to boost motivation.
If you’re never clear about what you want to achieve in life, you’ll lack direction. And, if you don’t have
direction, then you’ll lack focus. This leads to distractions that ultimately pull you farther away from
what’s really important to you.
Setting financial objectives will help you focus on your priorities, so you’ll begin to align your actions
with your values. They act as a filter that eliminates those tempting distractions.
This may lead you to make some tough decisions, like no longer helping your adult children with
expenses or fully funding their college education.
When your current decisions are based on your long-term vision, it’s easier to make choices that
support your objectives. You’ll have more confidence in how you manage your money because you
know your actions reflect your priorities.
Also, being focused on what’s important means you’re less tempted to spend extra money on stuff that
doesn’t contribute to your overall progress. You’ll be more committed to making financial decisions that
move you closer to your achievable goals.
#5 Financial goals strengthen motivation & commitment

Being specific about your financial objectives not only gives you direction, it also creates the motivation
to persevere through adversity. As you move closer to your target, your commitment to reach it gets
stronger.
Many people avoid setting goals because they fear the disappointment of failure. However, failure is
often a necessary stepping stone to success and offers valuable lessons.
As you come against setbacks and unexpected difficulties, your goals provide the motivation to keep
moving forward.
When you set specific goals, you also create clarity about your future. If you have a clear idea of where
you’re heading, and what’s possible for your life, you’ll more likely follow through with taking action.
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Finance Over Fifty
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Why Is It Important To Set Financial Goals? Here Are 9 Powerful Benefits
By Sabrina | May 26 | 19 minutes of reading
Goal planner with coffee / representing why is it important to set financial goals
Table of Contents
Why it’s important to set financial goals
Have you ever wondered, why is it important to set financial goals? If so, then I’m glad you’re here.
In this post, I’m going to share with you the many proven benefits of setting financial goals. Learn how
you can experience amazing positive changes in your life by getting specific with what you want and
taking intentional action.
Just having big dreams or good intentions isn’t enough. If you want to fully realize your vision for your
financial life, you need to map out a plan that will make that happen. This includes setting goals that
support your values and priorities.
Having meaningful goals can set you on a path to a debt-free life, and guide your journey to financial
freedom.
The benefits of setting financial goals all work together to boost your financial health. You’ll gain more
confidence in your money management decisions and significantly decrease money-related stress.
If you want to take control of your money and create a more financially secure life, you need to set
some financial goals.
thin orange line
Ready to crush your financial goals? Get this FREE financial goal tracker today!
thin orange line
What are the benefits of setting financial goals?
Establishing financial goals is a critical step toward success, stability, and security.
When you decide how you’re going to manage your money in order to achieve the life you want, you
begin to align your actions with your goals. This is how you set your life in motion toward a specific
outcome.
Life goals, in general, benefit your life by creating focus, motivation, and confidence. But, when you
include defined financial objectives in your life plan, you set yourself up for successful outcomes that
benefit several areas of your life.
Here are 9 benefits of setting financial goals:
You can create an effective action plan for your finances

You can choose appropriate strategies
You can measure your progress
You know what your priorities are
You strengthen your motivation and commitment
You increase your chances of experiencing positive outcomes
You create built-in accountability
You improve your money mindset
You have hope and confidence in your future
All of these benefits create powerful change in your life, and they will inspire you to make financial
decisions that move you closer to your larger goals.
Let’s go over each one in detail.
#1 Financial goals guide your planning
Once you’ve decided on specific financial objectives, you can design an overall plan to achieve them.
When you know where you want to end up, you just have to fill in the steps to get there.
These steps are just “pieces” of your bigger goals. For example, let’s say you have a long-term goal to
be debt-free in 5 years. You would break down this big goal into smaller targets along the way. These
might include cutting expenses, increasing your income, and doubling your monthly payments.
These smaller goals act as milestones on the way to fulfilling your long-term vision. They inform you
how much you need to save to reach your big goal. Some will be reached sooner than others, but they
all contribute to achieving your big objective.
These milestones guide your financial planning, and reaching every target helps push you forward to
the next one.
And, as you categorize your goals into short, mid, and long-term, they collectively create a timeline for
you to follow. This allows you to create an effective and realistic plan to reach your big goal.
#2 Financial goals inform your strategies
When you plan a road trip, you typically begin with your destination. Then, you decide what route you
want to take to get there.
Your personal ambitions can be achieved in many different ways. But, depending on your timeline and
circumstances, the path you take to reach them will vary. Different financial objectives will require
different strategies.
When you’ve set your financial goals, you have a high-level view of where you’re going. This
perspective will help you determine the tools and methods that would best support your efforts in
reaching them.
You might choose a certain budgeting process or investment vehicle because it offers the greatest
potential progress within the time frame you’ve set. Or, you might choose between the debt snowball
and debt avalanche methods to wipe out your debt balances.
The only way to make a choice with confidence is by having clearly defined goals that inform your
strategies.
Then, you can implement the most efficient means of achieving them successfully.
#3 Financial goals provide measurable progress
Setting financial objectives provides a way to measure your progress so you know if you’re on the
right track or not.
As you take the necessary actions to achieve your goals, the results you experience can give you
perspective and insight. They allow you to identify what’s working, and what needs to be adjusted.
Having a standard to measure yourself against creates the awareness to self-evaluate and self-correct
when necessary. Knowing when and what to change in your financial plan is critical to achieving your
goals on time.
Also, seeing how far you’ve come and how much closer you are to your goals is a great way to boost
motivation.
If you’re never clear about what you want to achieve in life, you’ll lack direction. And, if you don’t
have direction, then you’ll lack focus. This leads to distractions that ultimately pull you farther away
from what’s really important to you.
Setting financial objectives will help you focus on your priorities, so you’ll begin to align your actions
with your values. They act as a filter that eliminates those tempting distractions.
This may lead you to make some tough decisions, like no longer helping your adult children with
expenses or fully funding their college education.
When your current decisions are based on your long-term vision, it’s easier to make choices that
support your objectives. You’ll have more confidence in how you manage your money because you
know your actions reflect your priorities.
Also, being focused on what’s important means you’re less tempted to spend extra money on stuff
that doesn’t contribute to your overall progress. You’ll be more committed to making financial
decisions that move you closer to your achievable goals.
#5 Financial goals strengthen motivation & commitment
Being specific about your financial objectives not only gives you direction, it also creates the
motivation to persevere through adversity. As you move closer to your target, your commitment to
reach it gets stronger.
Many people avoid setting goals because they fear the disappointment of failure. However, failure is
often a necessary stepping stone to success and offers valuable lessons.
As you come against setbacks and unexpected difficulties, your goals provide the motivation to keep
moving forward.
When you set specific goals, you also create clarity about your future. If you have a clear idea of
where you’re heading, and what’s possible for your life, you’ll more likely follow through with taking
action.
Related Post: How To Motivate Yourself To Achieve Your Goals
#6 Financial goals improve your chances of success
As mentioned before, setting financial goals provides the clarity needed to create the positive results
you want in your life. If you don’t define the outcomes you want to experience, your journey toward
financial freedom will be cloudy at best.
Someone smart once said a dream without a plan is just a wish. In other words, if you’re only
dreaming about what could be, and never taking action, you leave it to circumstances to determine if
your dream will ever come true.
Setting defined financial objectives propels you into actionable behavior and your chances of actually
realizing your dreams greatly increase. Once you’ve charted your course to achieve them, you set
yourself in motion toward a successful outcome.
#7 Financial goals provide built-in accountability

For some people, the road to a financially secure retirement is paved with good intentions. That’s
because many fail to move from just good ideas to a specific, well-written plan.
And, if there is no plan, there is nothing to be accountable for.
Accountability is important when it comes to goal setting because it establishes responsibility. Your
goals are like benchmarks you set for yourself, and it’s ultimately up to you to reach them. This
creates a sense of ownership that contributes to a successful outcome.
Writing down your financial objectives and reading them every day is a powerful habit to practice.
Daily reminding yourself of the improvements you want to make in your life will instill a deep sense of
responsibility for making progress.
#8 Financial goals will improve your money mindset
You can practice all the best money habits, but you’ll never achieve financial freedom if you have an
unhealthy money mindset.
Your money mindset is your own beliefs and attitudes about money. These beliefs drive your
behavior, which leads to results.
So, if you believe that you’ll never get out of debt, or that you’ll never make more money, or that
you’ll never have enough to retire … guess what?
You probably won’t.
The beliefs you have about money shape the way you manage your money. In other words, your
actions will inevitably confirm your beliefs.
Setting financial objectives can help you create a healthier money mindset. The productive habits you
develop and the progress you experience foster a more positive outlook that breaks those old beliefs
over time.
As you experience small successes along the way, you’ll have a sense of achievement. This will allow
you to open yourself up to greater possibilities.
You start believing in yourself and in your ability to create a better future. You become more
comfortable with risk, and you’re more willing to explore new directions. Your mind opens up to a big-
picture view, and you begin to see all of the amazing opportunities around you.
That’s when your mindset shifts and your beliefs inspire actions that lead to positive and prosperous
results.
Related Post: 4 Disguised Fears Holding You Back From Achieving Your Goals
#9 Financial goals can foster hope and confidence
Have you ever been driven around by someone who doesn’t know where they’re going? Maybe your
spouse took you to an appointment and insisted they could find the building and get you there on
time. But, after five u-turns, you began to lose faith in their navigational skills.
Having a map to guide you is one way to feel confident that you’ll get to your destination. You know
the address and you have the directions to get there. It’s just a matter of following the map.
Setting financial objectives is like creating a map for your money management. Once you determine
where you want to end up, your goals act like landmarks along the way. With each one you reach, you
know you’re going in the right direction and you’re closer to your destination.
You’re confident and hopeful that your journey will be a success, as long as you keep moving forward.
Having defined goals takes the guesswork out of your financial planning. You know the steps you need
to take, and you’re confident that your actions are supporting your personal ambitions.
And, when you’re confident in your decisions, you have hope they’ll lead to a better life.
Now that you know the powerful benefits of setting financial goals, you might be wondering about
the best way to make your own.
Of course, this active process can be as simple as creating a list of objectives that are meaningful to
you. But, the more specific you are with your goals, the greater chance you’ll have of following
through and making them a reality.
Later, I’ll go over 5 steps to set financial goals and stay committed to your plan. But first, let me give
you a few examples of the three types of financial goals.
What is a financial goal?
Financial goals are the specific intentions you decide for your money. Your goals are unique to your
personal financial circumstances, and they give you defined targets to aim for. They represent the ideal
outcome of your financial decisions over time.
Financial goals should be specific, measurable, achievable, and time-based.
Your goals also need to be meaningful, relevant and aligned with your values.
You’ll also want to organize your goals into categories of time. Creating short-term, mid-term, and long-
term goals will help you stay on track with your financial targets.
Examples of financial goals
There are three main types of financial goals: short-term, mid-term, and long-term. Whether you want
to get out of credit card debt or save for a dream vacation, any financial goal can be categorized as one
of these three types.
The more specific you can make your goals, the better chance you’ll have of achieving them. Setting a
goal date and identifying a measurable result will help you stay focused and on track.
Here are some examples of each type of financial goal.
Short-term financial goals examples
Short-term financial goals can be set for anywhere from one day to 2 years in the future. They are the
objectives you can achieve within a relatively short amount of time.
Your short-term goals should always get you closer to your medium and long-term goals. They are the
“quick wins” in your overall financial plan.
Here are some examples of short-term financial goals:
Pay off $5,000 of credit card debt within 18 months using the debt avalanche method
Save $1,500 for a summer vacation before May 1st
Purchase life and disability insurance within 12 months
Open a tax-advantaged retirement account like a 401(k) or IRA within 3 months
Start meal planning this month to cut food expenses by 25%
Shop around for lower auto insurance premiums this week
Medium-term financial goals examples

Medium-term goals for your finances (also called “midterm”) should be achievable within 2 to 5 years.
They take longer to reach than short-term goals, and they’re like the bridge between your short-term
and long-term objectives.
Here are a few examples of mid-term financial goals:
bring your credit score above 800 within 2 years
Increase monthly retirement saving contributions to 15% within 3 years
pay off my $10,000 personal loan within 4 years
save $20,000 for a European dream vacation in 3 years
have a $40,000 down payment for a new home within 5 years
build a 6-month emergency fund within 2 years
Long-term financial goals examples
Your financial planning should start with your long-term goals, which can take anywhere from 5 to 20
years to achieve. That way, you can break them down into medium-term and short-term goals.
They are your biggest objectives, so they typically require the greatest time and financial commitment.
Here is a short list of long-term financial goals:
build $50,000 in additional savings for college tuition within 10 years
be free of student loan debt within 15 years
pay off the mortgage within 20 years
fully fund my retirement accounts by the time I’m of retirement age
generate $10,000 a month in passive income by my 55th birthday
Now, let’s go over how to create your own financial goals.

5 steps to set financial goals you’ll stick with
If you’re going to take the time to set goals, you’ll want to make sure you choose ones you’ll actually
commit to. Take these 5 steps to create money goals that inspire you to take action:
1. Be specific
Thinking “I’d like to save more money” is an idea.
But, writing down I’m going to put $500 into my savings account every month for a year is a goal.
Get specific with details and action items. Know exactly what you want to accomplish. A goal needs to
be clear and concise.
2. Make them measurable goals
If you can’t measure your progress, your goal isn’t specific enough.
You must be able to quantify results so you can break down your overall goal into smaller pieces that
can be measured. This way, you can create actionable steps that inevitably move you forward.
Don’t leave room for interpretation or opinion. Have clear and defined milestones that serve as
evidence of progress, so you can stay focused and motivated.
3. Give them a time frame
A big mistake many people make when setting goals is not setting a deadline. As a result, their goal
keeps getting pushed back because less important, every day tasks take precedence.
According to Parkinson’s Law, “work expands to fill the period of time available for its completion.” If
you give yourself an endless amount of time to achieve a goal, you will continue to fill up your hours
with busy work and never see it fulfilled.
Giving yourself an end-date will boost motivation and sharpen your focus. You’ll be able to prioritize
more effectively when you are bound by a specific amount of time.
4. Know your why
Just like you need to get specific about your goals, you also need to be crystal clear about the reasons
behind them.
If you don’t have an emotional connection strong enough to drive your actions, you’ll give up at the first
sign of adversity.
The goals you set for yourself likely came from a desire to improve your life in some way. You believe
they’ll benefit you and contribute to a better future. This sounds good, but it’s not enough to carry you
through setbacks and disappointments.
Ask yourself why a goal is important to you. How will it affect your life? What impact will it have on your
family and loved ones? What would happen if you don’t achieve it?
Keep digging until you find the core reason that creates a strong emotional connection to the goal. This
will typically be related to what you value most in life, like your family, your faith, or your purpose.
Knowing your why will be the strongest motivating factor throughout your journey to achieve your goal.
Take the time to get real about your reasons.
5. Put your goals in writing
Studies have shown that people who write down their goals experience a greater success rate in
achieving them. Why is this?
Putting your goals in writing forces you to get clear and focused. It’s the start of taking action. It’s
putting yourself in motion.
You also create a visual cue that reminds you where you’re headed. When you take a bit of time to
review your written goals, you motivate your actions. You become more intentional about aligning your
behavior with your priorities.
Written goals also turn daydreams into declarations. They’re no longer passive thoughts, but they
become something tangible that you can see, read, and interact with. This small switch is a powerful
force that tells the brain to start seeking solutions that will help you achieve your goals.
Don’t keep your goals in your head. Put them down on paper, and review them every day.
Video: How To Set SMART Goals
Habits that help you achieve your financial goals
If you want to achieve your goals, you’ll need to develop smart habits that keep you on track.
Money habits are like the stepping stones that get you from the starting line to the finishing line. They’re
the behavior systems that support the results you’re trying to achieve.
Good habits take time to develop. But, once they become second nature, you can rely on them to get
you where you want to go.
Here are a few smart money habits that can help you achieve your financial goals:
Track your spending and follow a monthly budget
Make purchases with cash, and minimize debt
Avoid lifestyle inflation and live below your means
Automate your savings contributions with bank transfers and direct deposit
Make savings a priority and always pay yourself first
How to track your progress with a financial goal chart
Set yourself up for success by creating a chart that tracks your progress toward your financial goals.
A financial goal chart will help you get specific with a timeline, strategies, and actionable tasks.
Here are six concrete steps you can take to create your own financial goal chart:
Write down one financial goal that you want to achieve.
Determine the financial commitment the goal requires.
Decide an end date for when you could realistically achieve this goal.
Break down that financial commitment into monthly saving goals.
Write down effective action steps you can take.
Track your monthly progress.
Let me show you an example:
You can make your own financial goal chart and tracker, or download a free one from this page!
Keep your options open and adjust when necessary

Nobody knows what the future holds, so it’s important to maintain a degree of flexibility when it comes
to your financial goals. Life rarely goes as planned, so know what your options are and adjust your
course when you need to.
Losing the job you’ve held for 20 years, or getting diagnosed with a debilitating disease, can throw your
plans off track overnight.
Prepare for these setbacks before they happen. Have a backup plan you can implement, so you can
minimize any negative repercussions.
You might need to reprioritize or shift your goals, so they fit better into your new circumstances.
For example, if your retirement plans revolved around retiring early, you could extend your timeline a
few more years. Or, if your goal was to pay for your kids’ college tuition, you may have to split the bill or
pick a less expensive college.
The point is, having a financial plan – regardless of life’s curveballs – will prevent your dreams from
falling off the rails when life takes a sudden turn.
You may even choose to meet with a financial professional, who can offer tremendous support in
helping you reach your financial goals.
Here are just a few ways a financial advisor can help you:
meet with you regularly to evaluate your progress
determine if adjustments need to be made
give you relevant financial advice
offer investing assistance with retirement funds
guide your efforts with saving for retirement

thin orange line
Don’t forget to grab this FREE financial goal tracker today, and start crushing your goals!
thin orange line
In summary: It’s important to set financial goals for yourself
I believe everyone is born with a sense of purpose, but most of us lose it as we get older. It gets buried
under the challenges of life, and we lose sight of the bigger picture. So many people settle for what life
gives them, instead of being intentional about creating a life that reflects their purpose.
One of the main benefits of setting goals is to line up your purpose with your actions. They give you
direction, focus your energy, and give you a sense of accomplishment when achieved. They help you to
be future-oriented.
And “purpose” doesn’t have to be a huge deal. It’s not always about your life’s purpose. It could be a
smaller purpose that helps you get to the larger one.
Goals are born out of a vision – typically, one that will improve the quality of your life. If you don’t have
a vision for your future, and one you can connect your biggest goals to, you will end up settling for
whatever life hands you.
It’s important to have goals that will guide your actions and provide motivation to keep going. To keep
moving forward toward a richer, more fulfilling life.
Don’t let circumstances determine your results. Don’t be passive with your awesome retirement
dreams.
Get future-focused. Take control. Start changing the course of your life.
You have a big part in creating a better future for yourself, so set some financial goals and start making it
happen!
Other posts you may enjoy:
100 Money Journaling Prompts To Improve Your Financial Life
How To Make An Extra $1000 A Month: 50+ Profitable Side Gigs
The One Thing Summary: How Going Small Leads To Big Results
How To Get Rich With A Normal Job In 2023
Why Is Saving Money Important? Here Are 50 Inspiring Reasons!
How To Take The 100 Envelope Challenge & Save $5,050
How To Save $1000 A Month (Without Working More)
5 Principles To Change Your Life After 50
What Does The Bible Say About Debt? 50+ Verses For Financial Freedom
5 Ways Limiting Beliefs Harm Us
4 Disguised Fears Holding You Back From Achieving Your Goals
How To Meet Your Future Self and Change Your Life
A Willingness To Change: Here’s the How & the Why
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What Is A Budget

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What Is A Budget

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What is a Budget?

A budget is a financial plan for a specified period.

Budgets can be for a person or for a business.

These goals can be personal or professional.

A corporate budget is an encapsulation of a company’s financial position at a specific point in time. It is

They are not necessary for survival.

Popular Budgeting Methods

Some Items in a Business Budget

Oregon.gov HomepageToggle Main Menu

dfr logo Manage your finances

You are here:

Division of Financial RegulationFinancial services for consumersManage your financesCreating a

Creating a personal budget

Creating and Using a Budget

What is your perspective on budgeting?

What is a budget? What is the budgeting process?

Tracking your actual spending and income

Making adjustments to the plan

Why budget? Budgeting helps to:

Free up money to pay down debt

Save for things you really want

Reduce stress and build confidence

Better prepare for emergencies

Five simple steps to create and use a budget

Step 1: Estimate your monthly income

Total estimated monthly income $3,000

Step 2: Identify and estimate your monthly expenses

Fixed expenses May include but not limited to;

Variable expenses May include but not limited to;

Cell phone $100

Car Insurance $200

Eating out $100

Total estimated expenses $2,700

Step 5: Stick with it ማጥበቅ

Using strategies to reduce impulse purchases and build self-discipline

Why is budgeting important?

4 Reasons Why Budgeting Is Important In Personal Finance

14 Oct 2022, 5:07 PM IST

14 Oct 2022, 5:07 PM IST

<div class="paragraphs"><p>Source:&nbsp;Drazen Zigic on Freepik</p></div>

Why Is Budgeting Important In Personal Finance Management?

#1 Budgeting Helps Avoid Overspending

#2 Budgeting Helps You Achieve Your Financial Goals

#3 Budgeting Makes Saving Easier

Get Started Now

1 (800) 431 – 8157

Financial Goals Examples and Tips

MELINDA OPPERMAN MONEY PERSONAL FINANCE

What is a Financial Goal?

Types of Financial Goals

There are several types of financial goals:

Short-term financial goals

Mid-term financial goals

Long-term financial goals

7 Examples of Personal Finance Goals

1. Start an Emergency Fund

2. Pay Off Debt

3. Save for Retirement

4. Strive for Homeownership

5. Pay Off the Car

6. Invest in a College Education

7. Plan for Fun

Recommended Reading - How to Manage Money?

<div class="paragraphs"><p>Source: Drazen Zigic on Freepik</p></div>