Are you ready to be the boss of your money? Financial goals give you a clear roadmap for your financial journey. They give you a sense of direction, keep you motivated, and show you the way forward. With these goals, you can make smart choices and reach important milestones.
We asked Laura Moore, Money & Mindset Coach and Personal Finance Educator to take over to explain the importance of financial goals, the different types of financial goals and how you can calculate them.
Why are financial goals so important?
On a practical level, financial goals help you to calculate how much you need to save every month to reach your goal. But on an emotional level, feeling excited about a goal is going to help you to prioritise delayed gratification over instant gratification. You're less likely to spend your money in the month on things you don't really care about. And you're more likely to put your money away every month towards things that you're excited about.
What are the different types of financial goals?
Value-based goals: The most common type of financial goal is a value-based goal. For example, you may want to save £5,000 to go travelling in two years.
Education-based goals: Education-based goals are focused on learning something new. For example, you may want to learn how to invest.
Habit-based goals: Habit-based goals are focused on creating a new habit that improves your financial wellbeing. For example, you may want to look at your bank account on a daily basis.
How to create a financial goal and how to calculate your monthly savings
When creating a financial goal that is value-based, there are three things that you need.
The what, the when and how much. Ask yourself the following questions:
- What is it that you're saving for? For example, you might be saving for a house deposit.
- When do you need this money by? Is it one year or five years? In this example, let's say five years.
- How much money do you need to save for this goal? Let’s say £30,000 pounds.
Now, you need to calculate how much to save every month to reach that goal. You're going to do this calculation:
In this example, you would need £30,000 in five years for your house deposit. It would be £30,000 ÷ 60 months (five years) = £500
So, you’d need to save £500 per month for the next five years to reach your goal. This calculation not only helps you work out if your goal is realistic, but is also going to help you stay on track.
What can help you to reach your financial goals?
Making the most of money apps
Apps like Snoop, Emma and Money Dashboard can help you to monitor your spending habits and make necessary adjustments. Regularly reviewing your finances can help you to make realistic goals and identify areas where you can cut back and save more money.
Another way to boost your savings is by using cashback apps. Cashback apps like Topcashback, Quidco and Airtime rewards will allow you to build a pot of cashback when you make regular purchases. These can sometimes be used in conjunction with discount codes, making them one of the only ways to get a double discount in the UK.
Opening a savings account
Here’s how savings accounts can play a crucial role in helping you reach your financial goals:
- Allows you to separate your savings from your everyday spending
- Allows you to set up automatic transfers to your savings account, making it easier to save and track your progress
- Many savings accounts offer interest which can contribute to the growth of your savings
- Encourages discipline and regular saving habits
Seeking professional help
If you’re struggling to reach your financial goals you may choose to consult with a financial advisor, money coach or accountant so they can help you to create a financial plan tailored to your goals.
There’s also free support and advice available if you’re struggling to manage debt and don’t know where to start. Click here to read our blog that lists what support is available if you need it.
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