5 Personal Finance Goals You Should Set for Yourself

The pursuit of riches shouldn’t be the most important thing in your life. However, money is an essential part of that life. You need money to buy food, keep a roof over your head, and enjoy most of your favorite activities. For these reasons and more, personal finance is absolutely crucial.

If you’re not actively managing your finances, they can easily go off the rails. That’s why you should be setting realistic, measurable goals to pursue. Achieving the following objectives can help you get — and keep — your financial life on track.

1. Change Your Overspending Habit

In financial matters, forward progress often depends on eliminating habits that are setting you back. For many, this habit is chronic overspending. If this is a problem you have, there’s no better place to start.

Changing bad habits may be easier said than done, but a smart debit card can help. Modern debit cards can allow you to avoid monthly fees and save passively through round-up and automated saving features.  When, say, a quarter everytime you buy a soda is automatically squirreled away for you, it starts to add up.

Remember to make the goals you set measurable. Otherwise, you won’t be able to see if you’re making any progress. For example, review past bank and credit card statements to see how much you spent at restaurants over the last six months. Calculate the average, then aim to reduce your monthly spending on restaurant dining and takeout by 10%. Simply vowing to spend less won’t get you far without benchmarks to show you’re actually achieving your goal.

2. Follow a Budget

You’ve probably been told that following a budget is the best way to get your finances in order. Whoever told you that is right. It might sound like a cliche, but this advice is only common because it’s a reliable truth that too often gets cast aside.

Every budget is different. You can’t compare your budget to your neighbor’s, who almost certainly has a different income and spending habits. Rather, you need to write down your own earnings and expenses to know just how you should be budgeting.

That doesn’t mean there aren’t guidelines that can help you get going. For example, the 50/30/20 rule is a straightforward way to start budgeting. Under this rule, you spend 50% of your income for needs such as your rent or mortgage and insurance. The next 30% of your income can go toward your wants, while the remaining 20% goes into savings, debt reduction, or investments. The best budget possible may be more detailed than that, but any framework is better than no direction at all.

3. Get Out of Debt

Millions of Americans are currently facing significant debt. Heavy loan payments will restrict your ability to pursue other financial goals. And hefty credit card payments can make it impossible to save money or stay within a monthly budget.

Getting out of debt will likely require some sacrifice. You’ll have to look at items in your budget that can be taken out temporarily. This will likely come from your personal spending on wants. Opting out of a proposed vacation or making do with last year’s wardrobe can help you fit in necessary debt payments.

As with your other goals, your debt repayment objectives should be specific and measurable. What is a realistic time frame for getting out of debt? Setting that horizon will enable you to calculate how much you’ll need to pay each month to reach your goal. Recall your 50/30/20 budget. If you can’t feasibly pay that amount out of 20% of your monthly earnings, you’ll need to move your repayment finish line.

4. Set Aside Emergency Savings

While it’s admittedly difficult to save up an emergency fund while also battling debt, this is another essential financial practice. Unfortunately, it’s one that too often gets neglected. Having funds set aside in case of an emergency can be a literal life saver. It can help you get a car fixed, make an urgent home repair, or pay an unexpected medical bill.

Most experts will suggest that you set aside enough cash for at least three months’ worth of expenses. This includes housing, food, transportation, and any other necessary spending. If you were to lose your job or get seriously injured, these emergency savings will keep you afloat.

Your initial financial goal should be to get your savings up to that minimum level. This likely won’t be accomplished immediately. You’ll have to make regular monthly contributions that build your savings up to a point where you feel comfortable. Having reached that stage, you can continue to build up further emergency funds if you’re able.

5. Improve Your Credit Score

When you have a good credit score, a lot of financial burdens become lighter. A high credit score can yield lower-interest loans, reduce your insurance rates, and even bypass the need for certain security deposits. If your credit score isn’t currently where you’d like it to be, make a conscious effort to raise it. Once you do, all those benefits can be yours.

Rebuilding your credit score will take time. You need to start by ensuring you make all your payments on time. Nothing drops a credit score faster than a late or missed payment. You can also review your credit report and dispute errors, if any, that might be harming your score.

Here your goal can be to reach a certain number for your credit score. If yours is hovering around 550, aim for 700, which is considered a good credit score. Develop a plan for improving your credit score and use that number as a target point.

Life is so much easier when financial concerns aren’t getting in your way. By setting and achieving these personal financial goals, you’ll feel a new sense of security and freedom.

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