What is a Financial Goal?

Definition of a financial goal

A financial goal is a money related target that is set either by an individual, company or organization when managing funds. This financial target can either be in terms of saving, earning, spending or even investing.

In simple terms, a financial goal is something that you need or want to have that involves money. In order to understand what financial goal is, it’s better to first understand what it’s not.

What is not a financial goal?

If you have a chubby stomach and you desire to have a six packs, getting the six packs is a goal. However, this cannot be a financial goal since it can be attained without having money. There are many people who carry out physical exercises at home and attain their desire physical body without the need of going to a gym.

Therefore, from this example, it can be seen that this is not a financial goal. However, if you want to buy a car, you will need to earn and save money to achieve such a goal. As a result, buying a car can be categorized as a financial goal.

Types of financial goals

Often, financial goals are categorized into three types. The three types of financial goals comprise of short-term goals, mid-term goals and long-term goals.

Short term financial goals are those goals which you can achieve within a short period of time. Usually, short term goals are the ones which can be attained within a period of one year or less.

Mid-term goals on the other hand are goals which do not require much time but also do not require short period of time to be accomplished. The timeline for mid-term financial goals is usually from one year to five years.

Long-term goals are goals that cannot be attained within a short period of time. Depending on your financial ability, if you need more than five years to achieve a goal, then such a goal can be classified as a long-term goal.

How to create a financial goal

For you to create a financial goal, it is important to first list what financial need or want that you desire to attain. After you have picked the financial need or you want that you consider important in your life, the next phase is creating a budget and ensuring that you keep a good track of your income and expenses. At this stage, ascertain the amount of money that you can set aside within a specific period of time that is targeted at attaining this particular goal. By combining a saving and investing culture, one can easily achieve their short term and long term financial goals.