How to Set Financial Goals
Financial planning and setting financial goals should be a major part of your life. It can
- Support your other goals by making them affordable
- Give you emergency backup when something goes wrong
- Gives you a feeling of stability
- Covers your retirement years
Gets you out of debt (Jeff Rose, Good Financial Cents)
Most people don’t do financial planning. They don’t have a financial goal. They have no idea how much they spend every month, they don’t even have a spending limit.
If you are interested in building a stable income, or different income streams, you are already different from most people.
Regardless of whether you are experienced in financial planning or not, this post should help you set up a financial goal for your future:
What is the definition of a financial goal?
According to Lauren Schwahn’s article on nerdwallet:,
“Financial goals are the personal, big-picture objectives you set for how you’ll save and spend money.”
So if you set your goal, it includes both, how you handle your money and how you earn it.
Where does your money come from? (Income)
When setting a goal it is helpful to imagine yourself having achieved your goal. This way you can see exactly where you want your money to come from:
Do you have a blog or sell products online? Or did you finally get the job position you always wanted? Do you sell your own books or resell bought items? Do you have a successfully running business? Or share your podcast or written songs across popular platforms?
Write everything down and be daring enough to write the imagined numbers next to it. Do you want to earn over 100k with your job? Why not? You want to make one million with your books? Of course you can.
It’s tempting to give into your insecurities and write down a lower number than you actually want. Don’t do it. Be brave and aim for your goals. What is the worst thing that could happen? That you only sell one copy of the book? Well then keep going because it’s only the end if you decide to give up. If you keep going you will come closer and closer to your goal, up to the point where you finally make your money goal come true
Tipp: Aim for more than one income stream
Seeing how millionaires established their wealth, can help us take some serious notes when building our own income streams: According to DividendRealEstate there are 7 income streams millionaires take advantage off:
- Earned Income (Aiming for a better job position or salary)
- Rental Income (Aiming to buy and rent out real estate)
- Interest Income (Aiming to make money from lending activities)
- Dividend income (Aiming to gain/invest a certain amount from/in stocks)
- Capital Gains (Aiming to sell assets such as buildings)
- Business profits (Aiming to build a profitable business)
- Royalties and Licenses (Aiming to publish a book)
Having more than one income stream gives us the comfort of being financially covered even in difficult phases. If your business struggles to stay above water, your second or third income streams will be your life vest until the storm moves by . So if you set your financial goals, do not only concentrate on one, but add at least two or three income streams (if not even all seven).
Where does your money go? (Expenses)
According to Schwahn’s definition of a financial goal, it does also include how we spend our money. When you imagine your goal situation – where does your money go?
Do you have your own house with a pool? Lovely children, who get their much-needed education? Or maybe your dream car?
Or do you prefer a nice caravan, traveling all around the world?
Write down what you see as an important investment, but don’t forget that most of your income should go to build your other income streams. Buying random items that you most likely won’t use after a short term or that bring no value to your life is just a waste of money.
(Personally, I am aiming for a 3-bedroom apartment in Seoul, with the prettiest night view and the most modern gaming equipment)
Also: Plan an emergency fund!
While seeing all the shiny things don’t forget to add an emergency fund to your financial planning. It could be 5% of your income every month or a set amount ready for when an emergency happens.
Summary
Benefits of financial goal setting:
- Support your other goals by making them affordable
- Give you emergency backup when something goes wrong
- Gives you a feeling of stability
- Covers your retirement years
- Gets you out of debt
What income streams are you aiming for?
7 Income streams of millionaires:
- Earned Income
- Rental Income
- Interest Income
- Dividend income
- Capital Gains
- Business profits
- Royalties and Licenses
What expenses (limit) are you aiming for?
Set an emergency fund for difficult times
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Love from Germany,
Carina and Julia
