It's easier to accomplish something if you have a reason for wanting to do it. So when it comes to your finances, setting goals will help you stick to your budget and avoid costly mistakes.
It turns out that setting financial goals is something financially fit consumers do on a regular basis – whether it's setting up an emergency fund, saving for retirement, or putting a down payment on a home, having a goal in mind is a key to success.
Diane Moogalian, Vice President, Customer Care, Equifax, says building up savings should be priority number one for most consumers.
“Having a savings account is a great way to help prevent things like having to use a credit card unwisely to pay for things you didn’t plan for,” she said. “Having a savings account can also be a great way to help you financially plan for things like a new car, a new home, education, and your retirement.”
Paul Golden, spokesman for the National Endowment for Financial Education, suggests consumers set a goal of saving 10% of their take-home pay.
“If you have regular paychecks, schedule an automatic transfer of 10% each time you get paid,” Golden told ConsumerAffairs.
He also suggests looking into the tax advantages offered by retirement savings accounts like Roth or Traditional IRAs.
Paying down debt
Michelle Perry Higgins, Principal and Financial Planner of California Financial Advisors, says other important financial goals might include paying off debt.
“As you age, your debt should be decreasing and your retirement and emergency reserve contributions should be increasing,” she said.
One result of focusing on financial goals is a consumer develops other good habits that eventually lead to financial stability – less debt and more assets. Bruce McClary, Vice President of Communications for the National Foundation for Credit Counseling, says these goals will change as a consumer ages.
“Millennials who financed a college education are likely to be focused on paying down their student loan balances while trying to provide for their basic living expenses,” McClary said. “Retirement savings is also a goal for those starting out as well as people in their 30s and 40s. Older individuals are likely focused on streamlining their budget as they prepare for or enter retirement.”
Making the most of financial resources
As consumers get ready to retire, they should make the most of their financial resources.
“Basic needs take priority while discretionary expenses take a secondary position in the order of importance,” McClary said.
Moogalian says being financially-fit is a lot like being physically fit. The way to achieve that fitness requires different activities for each stage of life. But like physical fitness, she says the key is sticking to it.