On Monday, I mentioned that I frequently meet with clients, ask them what their financial goals are and get a deer in headlights response in return. Sometimes it is difficult for us to clearly define our own goals or even know what we should be working on financially. So if you are having a tough time coming up with your goals, here are my top ten financial goals that anyone could be working towards.
Top Ten Financial Goals
1) 15% Savings Rate – I push my clients to try to save at least 15% of their gross income. For some, this is an easier goal than others, but it should definitely be the bare minimum of what you save. Your age, near and long term goals will then dictate where you allocate your savings (i.e. emergency fund, life goal fund or retirement fund).
2) Emergency Savings – I like to see emergency savings funds of at least 6 months of your average monthly expenses. Therefore, if you spend $2,000 a month, your emergency savings should be around $12,000. This cushion is critical to your financial plan as $1,000 – $5,000 “surprises” happen all the time and a healthy savings account will give you flexibility to handle those financial surprises.
3) Retirement Account Started – For some people, retirement savings is difficult to start because they have too many other expenses or immediate life goals, but if you can open an IRA with $1,000 or contribute some amount to your employer’s 401k or 403b plan, then you are at least starting on your road to retirement.
4) Healthcare for your family – Obamacare has made this a requirement for all US citizens, but it is a good financial move to pay for healthcare coverage rather than deal with a healthcare emergency that could leave you in a bad place financially.
5) Credit Score over 750 – A healthy credit score will not only keep your financing costs low, but it will help you with securing housing or insurance. If you don’t know your score, you can check it out for free at Credit Karma and see what they say as far as improving your score.
6) Debt to Income ratio of 35% or less – Your debt to income ratio is the amount of monthly debt payments you need to make versus your monthly income. You can improve this ratio by reducing your debts or earning more via side hustles.
7) Ability to finance a home – Whether or not home ownership is the right path for you, you want to make sure that you could get a mortgage should you want to make that choice. Accomplishing many of the steps on this list will put you in a good place for this goal.
8) Ability to open a credit card – You may not want to use credit cards, like some of my friends who actively take advantage of rewards strategies, but you never know when you may need the flexibility that a credit card could provide for you. Similar to the mortgage, many of the goals on this list will get you to this place.
9) Debt Freedom – There are different schools of thought as far as having debt; however, many people enjoy the benefits and flexibility of living a debt free life.
10) Financial Freedom – This goal is a different number for everyone, but it represents the place where you can retire and live comfortably. Financial freedom gives you the ability to say “F-You” to your job and whether or not you actually say it, there is a great feeling when you know that you could say “F-You” if you want to.
What financial goals do you think people should be working on?
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