MedBen Bancorp: 5 Goals for Personal Finance and Planning
5 goals for personal finance and planning
Posted on March 28, 2022
Financial goals help increase savings by ensuring that you have a sound basis for your future plans. While having a healthy savings account is ideal, factors such as building credit, investing, and accumulating retirement savings are also important for personal finance.
What is the financial goal?
A financial goal is a goal or plan that includes building financial literacy and managing your money. Most often, financial goals include saving money for a purchase of some kind, but a constructive goal may also include building credit, investing, or even making more money.
Why is personal finance important?
Tracking and managing your money is an integral part of your future success. The advantages of financial management include relieving this pressure and the ability to:
- Debt repayment: The average American household in debt owes about $145,000 from sources such as credit card debt, auto loans, student loans, and mortgages. Even the younger generation, ages 18 to 23, already have an average debt of $16,043.
- Building retirement savings: When you’re young, it’s easy to put off saving for retirement, but setting aside money is an integral part of enjoying a good quality of life as you age.
- Stay within your budget: Spending beyond your means can lead to a significant accumulation of debt, causing stress and anxiety. If you set budget and goals, you can stay comfortably within your means.
- You have emergency funds: Having an emergency fund is essential to be prepared for unexpected surprises. With an emergency provident fund, you can prepare for medical bills, home or car repairs, and other unexpected expenses.
Putting yourself on a secure financial footing will allow you to achieve your personal goals and build an enjoyable and healthy life.
Types of financial goals
Examples of SMART financial goals depend on your situation. You might want to save a few hundred dollars to buy a new tablet or laptop, or a few thousand to buy a used car. In general, there are three types of financial goals:
short term financial goals
Short-term financial goals can be achieved within a year. Examples of short-term goals include vacations, small home improvements, and electronics such as televisions and laptops.
medium term financial goals
Achieving something within the next five years is a medium-term financial goal. Setting goals like this may require more planning and preparation. Examples of medium-term financial goals include improving credit scores, saving to pay for a car, installing a pool or paying off a credit card.
Long-term financial goals
Achieving a long-term financial goal may take longer than five years. Examples of goals you’ll be working toward over a number of years include buying a home, saving for retirement, or starting a college savings account for your kids.
5 Examples of Personal Finance Goals
While everyone is different and has different desires, these examples of financial goals are common goals that many people have to improve their personal financial health.
1. Start budgeting
The primary purpose of a budget is to ensure that you live within your means, and it is useful when allocating money for future expenses.
Many people think that budgeting is something that involves strict calculations and spreadsheets, but most families take a more general approach. Subtracting your average expenses from your income can be a good start, but a more stringent budget plan might include setting aside specific amounts of money for specific expenses.
Monthly expenses, including bills, housing, and food for a family of four, may be about $7,095. Calculate your expenses over a few months to create a budget for purchasing food, entertainment, and extras so you stay within your means.
2. Build your savings
Another goal you might set for yourself is to set aside money in a savings account. Savings allow you to prepare for both expected and unexpected expenses. Your income will determine how much you can save.
How much you save will depend on your goal and time frame – someone who saves to buy a house will have to put in more money for a longer period of time than someone who saves for a car. If you’re saving up for a summer vacation, you might start in the fall and save up until the summer months when you book your flight.
No matter what your savings goals are, it’s important to have a clear plan and maintain discipline. The most popular savings strategy is to open a separate account and transfer money there. A budget goal can work in tandem with increasing your savings, as staying within or below budget can give you more money to save.
3. Improve your credit
Building credit can affect future financial goals such as buying a car or a home. People with a good credit score show a good history of payments, debt and credit history, so lenders are more likely to offer favorable loan terms and credit applications.
Steps you can take to help build credit include:
Pay bills on time
Keep your credit card balance low
Avoid opening too many lines of credit
Check your reports regularly
4. Save for retirement
Having a healthy retirement plan begins long before you retire. There are a few options when it comes to retirement savings.
Many employers offer a 401(k) plan. Some even offer matching options, which means they’ll contribute a percentage of their employees’ contributions throughout the year. Individual retirement accounts (IRAs) and Roth IRAs are other retirement savings accounts that can be good choices for people. Some also invest their money in stocks as a reserve retirement savings account.
5. Pay off debts or loans
Paying off debt and loans is an important financial goal because it can affect your ability to get a mortgage or make buying a car more difficult. Paying off your loans can also improve your quality of life as you will have less stress and disposable income to do the things you want to do, like vacations and home improvement projects.
Student loans are often a major source of debt. The average federal student loan debt is currently $36,510 per borrower, and even 20 years after graduation, nearly half of the debt still owes more than $20,000. It is important to do research before taking out student loans or loans of any kind to ensure that you will be able to pay them back in the future.
Improve your personal financial health with Bank Med Pen
Responsible financial management includes saving, budgeting, investing, and planning for unexpected expenses. With Professional Financial Services at Mid Penn Bank, you can work towards your personal financial health. Because Mid Penn Bank is a community bank, we invest in the people who make up our community.
The materials on this site have been created for educational purposes. It is not intended to and should not be treated as legal, tax, investment, accounting or other professional advice.
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