Money Management and Setting Your Financial Goals

By Janet Siroto · March 18, 2022 · 9 minute read

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Money Management and Setting Your Financial Goals

There’s no doubt about it: Thinking about money can be a bit nerve-wracking. In fact, one recent study found that 90% of Americans say money impacts their stress level. If you’ve ever swiped your debit card and seen “transaction denied” or looked at your credit card’s interest rate, you can probably relate to that.

But here’s the thing: Thinking about money is the way to get on top of your finances, so the sources of stress (overdraft, that includes you!) become very manageable and you can relax.

It’s also worth realizing that money is at your service. It allows you to achieve many of your biggest and best life goals, whether that means paying off your student debt, buying your own home, or taking a bucket-list trip with loved ones.

So let’s spend a little time setting some smart money goals that could help you both dissolve your financial anxiety and live your best life. Are you ready to learn how to set and stick to those money goals? Here we go!

Assessing Your Finances

When something stresses us out, we probably try to avoid it. For some, that means not going to the dentist often enough. For others (plenty of others), it means avoiding anything financial, from opening bank statements to checking our balances.

However, figuring out exactly what your current finances look like is a vital step. Sure, you probably know when you get paid, but have you checked how much is going toward your retirement savings every pay period or — gulp — exactly how much you’re spending on food delivery? Keeping a close eye on your finances might help you set smarter money goals.

It might seem easy to ignore the finer details of our finances in favor of blissful ignorance, but failing to know where you and your money stand might harm your financial health down the line.

So if you haven’t looked at where your money is going in a while, taking a look at how much money you’re bringing in, how much you’re spending, and how much you’re saving might help you set more meaningful money goals.

Taking a close look at bank statements, credit card statements, and even online banking records can help you determine where your money is going every month.

In addition to adding up just how much you’re spending on pad thai delivery every month, writing down big numbers like credit card, personal loan, or student loan debt can help you plan for payoff.

Online banking might be able to help you with this. Typically, banks offer apps where users can easily access details about their spending and balances. Your credit card bill or app can also often provide a graphic representation of where your dollars fly off to each month.

Figuring Out What Is Most Important to You

Once you have a snapshot of your overall financial situation, it can be worthwhile to spend some time reflecting on your money goals: what is really important to you.

While there are many things we know we ideally should be saving for, like a down payment on a house or retirement fund, your financial goals might not be the same as your sibling’s or your coworker’s.

Just like your parents always told you: You’re unique. And so are your money goals. For example, you might want to pay off student debt as fast as possible in order to free up more cash every month. Then again, you might be working toward public service loan forgiveness and not be as focused on quickly paying off student loans. Perhaps your financial goal is to save up an emergency fund or take a vacation in six months.

It’s likely that your goals will be a mix of short-term and long-term aspirations. For example, you might want to save for a vacation this summer; that’s a short-term goal. Or you might want to be building funds to use for a down payment on a house years from now or for a retirement nest egg decades from now. Those are longer-term money goals. If you’re looking for help brainstorming money goals, here are some popular goals to consider:

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Saving an Emergency Fund

Whether you’re easily covering your monthly expenses or grabbing change from the bottom of your bag to buy a coffee, many people are living paycheck to paycheck. But what if that paycheck disappeared or if you had a large, unexpected expense? Enter the emergency fund.

Recent history has taught us a lot about how emergencies can arise. Stashing away an emergency fund might help you comfortably weather a pandemic, a “company-wide restructuring” that eliminates your position, or an unexpected illness that cuts into your freelance earnings.

Most of us are not prepared for financial challenges. According to a recent survey, more than half of Americans couldn’t afford a $1,000 emergency. Consider a long-term financial goal of setting aside about three to six months’ worth of expenses to help you weather any rough financial waters that may lie ahead.

Paying Down Credit Card Debt

High-interest credit card debt can feel like a treadmill: You keep putting in more and more effort, seemingly without getting closer to the finish line. Many of us struggle with it. The average balance that consumers carry is over $5,000, and the average interest rate is over 16%. With numbers like that, it can take a very, very long time to pay off what one owes, especially if you only make the minimum payment. What’s more, if your balance is more than 30% of your card’s credit limit, your credit-utilization ratio won’t look too attractive to the credit reporting agencies (Equifax, Experian, TransUnion), and your credit score may skid south. In fact, some say that it’s financially healthiest to use only 10% or less of the credit your card extends to you.

It’s no wonder that for many of us, setting a financial goal involves the words “pay off my credit card.” Indeed, making a payoff plan instead of focusing on those minimum monthly payments could help you dramatically improve your finances. Your credit card statement will tell you how much to pay to get rid of debt in three years; that can be a helpful guideline. Looking into balance-transfer credit card deals, which offer low or no interest for a period of time (typically 6 to 18 months), may also be useful.

When you get out from under the burden of this kind of debt, other doors (like to a home you own) may open. It can give your budget just the kind of breathing room you crave.

Recommended: Why Does Credit Card Debt Seem Impossible to Pay Off?

Putting More Toward Retirement

Most of us know we should be saving for retirement, but that financial goal can be easier said than done when there are so many competing places to put our money.

The good news is that when you’re saving for retirement, even small amounts can grow over time, which makes saving for your golden years a great financial goal. Contributing regularly — whether through your employer’s plan or an IRA — is worthwhile, especially in times like these when inflation is high. Many experts say that a good money goal is to be saving 10% to 15% of your paycheck for your retirement. One smart move: If your employer offers a company match of dollars put toward retirement, put in at least the minimum required to snag it. So if your company says you must contribute 6% of your salary to get a 50% match, that means if you put in 6%, they will add 3% to your savings. Don’t leave that money on the table!

Establishing a Fun Budget

Okay, but what if you just want to go clothes shopping once a month without feeling guilty or take that Budapest vacation you’ve been dreaming about?

Make it work! Setting a financial goal is all about having your money serve you. Planning out your discretionary spending might not only help keep your finances on track but can also help you inject an extra fun quotient into your life. When a budget is too harsh and punitive, you might well wind up making impulse buys or otherwise overspending. If you know you have some cash stashed for mood-lifting purposes, you can stay on track.

But whether you’re focused on saving up for a down payment on a house, or a trip to Disneyland, you won’t get there without a plan.

Staying On Track

Once you’ve decided on a money goal or two, it’s time to put a plan into action. Seeing where your money is going might help you stay on track.

Your plan will vary depending on whether you’re tackling a long-haul climb out of credit card debt or saving an emergency fund. Whatever your financial goals, there are tools that can help you along on your financial journey. Having the right banking partner can play a crucial role. Look for a bank that can help you set up automatic deductions from your checking account on payday to savings toward your financial goals. And find a bank that doesn’t charge you all kinds of fees; after all, they’re enjoying the privilege of using the money you’ve deposited!

Partner with SoFi for Better Banking

SoFi is pioneering a smarter, simpler — and less expensive — way for you to bank. And that includes clever ways to help you meet your financial goals and manage your money. With an online bank account from SoFi, you’ll enjoy automatic saving features that help you organize your money, set savings goals, and save your change with Vaults and Roundups. Need more incentive? You won’t pay any fees: no monthly fees, no overdraft. And qualifying accounts will earn a competitive APY.

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What is a good financial goal?

Financial goals need to reflect what’s important to you, but for most people, they are a mix of short-term aspirations (like having an emergency fund and minimizing credit-card debt) and long-term plans, like retirement savings.

How do you stick to a financial goal?

Sticking to a financial goal can be easier if you set up automatic deductions that transfer money from checking (where you might be tempted to spend it) to savings. Also, getting familiar with your finances, developing a plan, and regularly checking your progress are good moves.

What are some money management tips?

It’s a good idea to assess your finances and make short- and long-term goals. Then, allocate a percent of your earnings and set up automatic deductions to your savings; pay down high-interest debt (like credit cards); establish an emergency fund; and start saving for retirement – even if it’s just a small amount, it will grow!

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