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3 Types of Financial Goals to Keep You Focused

3 Types of Financial Goals to Keep You Focused

When we want to set financial goals, where do we start? It’s important to start breaking your goals down efficiently.

There are three different main types of financial goals:

  1. number based goals
  2. habit-based goals
  3. education-based goals.

The number-based goals

Something such as “I will do x by x date” and based around the numbers, e.g., I will save £2000 by the end of the year, I will clear £3000 of debt in two years. It is tangible and easy to track, and you can break it down into mini-goals. It’s anything that is based on numbers saving, investing, clearing debt.
Break it down into many micro-goals, which we will get into shortly. You think of a money goal, and you straight away think of a number you are working towards to save for a house deposit to reserve for setting up a business for your emergency fund. These are the most common type of goals.

The habit-based goals

Now, this is something based on, as you guessed it, a habit. Something that you tell yourself that you’re going to do every day, or every week or every month, is chronic. So for example, “I will check my bank account daily” or “I will check my credit score monthly.” These goals are ones we could tick off on a habit tracker, which will improve our overall financial well-being and financial wealth. These things will help us, for example, to check your bank account daily. The action is small, but that can lead to something more significant because it means you’re always keeping an eye on your finances. And you’re also getting comfortable with looking at the numbers side of things.

The education-based goals

Now I love this type of goal because they are cheap and they’re free: education! We’re so lucky to have access to so much free content online, YouTube, podcasts, articles, blogs, magazines, etc. There’s so much content out there that we can educate ourselves on topics that we don’t necessarily know how to do.
It could be investing and learning about crypto-currency. It could be about learning how to budget, learning how to save, learning, even learning about what a pension is and what that means for you.
The good thing about that is at the moment, we are amid a pandemic. For many people, that income has been stopped or reduced, so it can feel overwhelming to think about a saving goal, especially if you don’t have disposable income at the moment. The good thing about this type of goal is that it is a cheap and free way to improve yourself and improve your knowledge and help you get to financial confidence. When your income increases and you are ready to start saving, you’ve already got that knowledge to hit the ground running.

Now I like to set myself one of each type of goal. I have a number-based goal to hit a certain amount of money invested by the end of the year. My habit-based goal is to make sure that I have a money date with myself every week to sit down and review my finances. My education-based goal is to learn about crypto-currency because I found it interesting recently. So you can set yourself one of each if you would like.

Timescales for your financial goals

When it comes to number-based goals, it is good to break them down into different timescales. Now, this is important because it’s straightforward to think about the things that are in our immediate future like going on holiday soon, or a new pair of shoes that you want, or something that you can achieve within the next year or two. The problem with that is that we will save for that specific thing, get to that point in time, spend our savings on the said thing, and then you’re back to zero again, and you have to start over. And some things require longer-term savings than others.

So what is good to do is break your goals down into four different timescales: immediate, short, medium, and long.

The timescale itself will be different for everybody, but what is good is trying and putting something in each category to start preparing for the future.

For the immediate goal, if you don’t yet have an emergency fund, that is something you should work towards, which is trying to have three to six months’ worth of savings readily available in cash. We should all start to work towards this, but it doesn’t mean you have to have it straight away: break it down into smaller amounts. Set up a pot, or set up a fund or a savings account that you can start to put that money into every single month. You’ll be surprised how quickly that grows over time.

When it comes to the short, medium, and long term, we need to start thinking about more important things that we want to do. Now put down big holidays for the short term, house for the medium term, and then retire for the long term.

One of the things that people don’t think a lot about is the long term, because who wants to think about their retirement?

It sounds boring. But the last thing you want to do is get 20 years down the line, start to get closer to your retirement, and think, “Oh gosh, I haven’t even thought about this!”
I don’t know, but I’m not going to be working until I’m 90 years old, nobody wants that. So it’s good to start thinking about what type of things you’re going to need money for: that money will be better off in different types of accounts. For example, your immediate savings should be in an easy-access account, whereas you can save longer-term cash in a pension or potentially in stocks and shares or ISA’s.

Monthly goals

Now start to think about breaking your goals down into monthly micro-goals. What you could do is to set yourself a number-based goal. Within a specific timeframe, ask yourself what the best way to break down that goal is? How much money do you need, and when do you need it by?
For example, if you wanted to save £1200 by the end of the year (which gives you 12 months), divide the total amount divided by the number of months to go, and that will provide you with the monthly amount to save £100 per month, making your goal more achievable because you know what you’re working towards.

Setting micro-goals

Another part of the work is setting micro-goals. These are little mini wins that you can celebrate every time you work towards your future. While working towards your goals, these mini-goals are going to feel amazing each time you hit them. So, another part of staying motivated is preparation. It’s so easy to fall off the bandwagon of working towards your goals when you are unprepared. We all know how hard it is to be, you know, eating healthy, working out – doing all of these things that require effort when we’re not prepared. The same goes for your finances.

We can set up automatic payments that auto-transfer money into your savings or clear your debt. So you don’t even have to think about it. It just does it for you. Spend some time at the end of every month, or whenever you get paid, to work on your budget.

See Also

Lastly, it is important to keep yourself accountable with your friends and family.

Get them to hold you responsible for your actions and track your spending. Like a habit tracker, so you can say, “I paid five pounds off here; I put 10 pounds towards this goal”. Mark it off as you go and see how much you’ll progress it, and that will keep you motivated because our brain loves those little wins. It’s all about reminding your brain what you’re doing and why you’re doing it and that you can get there. Now to add to that is that we can start to use positive affirmations. So this is something with your money mindset that’s going to have a massive impact. Tell yourself daily:

You are good with money, you are responsible for your finances, you are in control of your situation, you can budget and save, and you are worthy of having money and making money.

Pick one that’s right for you. Say it yourself in the mirror every day even if you feel silly, no one’s looking, and it will have a massive impact on how you work towards your financial goals.

We hope that this lesson with Laura will help you get on top of your finances and stay motivated. We all know the buzz of starting something new, but it’s the long game that we all need to play with money.

If you are looking for more help or personalized advice with your finances and goals, take a look at Laura on Instagram, her website, Twitter, TikTok or Facebook.

She has lots of free content that will help you with your personal finance and your relationship with money! If you are reading this and want more information on financial goals, you can also check out part 1 – How to Stay Financially Motivated with Laura Ann Moore.

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