Photo by Mikhail Nilov
Does having enough money stored away describe having a financial goal? Experts say it’s more than having money in your bank account. A financial goal is your plan for the money you’re saving up. Last year, only 21% of Americans could hit their financial goals, but experts say the numbers are woefully inadequate. Many people need a financial health check to commit to the long-term process. Unfortunately, life situations make it challenging, and this discussion will highlight a few.
- The diverse problems with income
How much you earn at the end of the month will play a great role in how well you set your financial goals. Although this is not always a given, a higher income means you can put more money aside and have a long-term plan for the funds. A crucial part of your financial goal is to be able to pay off any existing debt and have enough left to put away. Moreover, how well you use your income will also depend on the measure you put in place to live within your means. Some people could easily invest part of their incomes but, due to the failure to live within their means, have their long-term financial goals impacted.
Another aspect worth talking about under this point is inadequate income. If you’re living from one paycheck to the next, it can be almost impossible to rely on that to set at least one financial goal. All the money you earn in a particular month covers crucial bills that cannot be sidestepped. Although some online resources suggest squeezing as little as possible from an insufficient income, it can be hard to practice in real life. This is why having a side hustle to complement your day job can be an excellent way to make more, enabling you to save.
- Debt
Knowing that the average American has a debt balance that cannot be paid in the next 5 – 10 years is concerning. $96,371 is a lot to wrap your head around, and with unemployment and other money matters, it may be impossible for many to get rid of this debt. According to Bankrate, who conducted this survey, many people do not know the first thing about debt management, compounding the problem even more. In many situations, the first thing to do when you are in debt is to have the plan to pay it off. Usually, it is advisable to clear high-interest debts before lower-interest ones. The logic here is to avoid high-interest debt from accruing and hindering the debt clearance process. However, seeking help from a financial advisor or credit counselor may be advisable due to the technicalities involved. They are well-versed in matters concerning debt restructuring and will be better positioned to guide you clear those financial hurdles. While at it, remember to avoid raising more debt, as that defeats the purpose of setting your long-term financial goal in motion.
- Market fluctuations that impact your investments
The risk of losing funds and investments can be high when vital economic indicators aren’t favorable. Financial experts say diversification and knowing how to choose your investments are crucial. Both can reduce your risks and increase the chances of securing your investment. A diversified investment portfolio can include stocks, bonds, and critical financial assets that mean everything to your financial security. That can also include investing using options like the Swissmoney Platform, which provides options that may align with your long-term financial goals.
During market fluctuations, one of the first things to take a hit is investments, making it crucial to have a strategy to absorb the shock and create room for future recovery. It’s common for investors to fail to align their portfolios with specific financial goals. You can break the trend by creating a long-term strategy that fits into your future goals and can be a reliable backup when the time comes.
- Unexpected life events
As the saying goes, life happens when you least expect it. Chronic illness, divorce, job loss, severe injury, bereavement, and huge unplanned purchases, among many others, are common examples of unexpected life events. Ideally, an emergency fund would have handled all these unexpected events, but financial reports indicate that only a small percentage of the American adult population has that backup. People are compelled to rely on family, friends, or long-term funds saved for a different purpose when that happens.
You don’t need someone to draw your attention to how this can impact your long-term financial goals. The frustration associated with navigating these unplanned events can escalate quickly, which is why you must save consistently. Your financial stability in these moments largely depends on how much you set aside in your emergency fund, so keep this in mind. At least six months’ worth of your living expenses is recommended for a standard fund. To get started, sometimes, you need an automatic contribution from your bank account to keep your emergency fund stocked.
- Lifestyle choice
Your lifestyle choices often majorly affect your long-term financial goal planning. Living an affluent lifestyle when you don’t make enough results in spending more than you may earn. Even if you make enough, an unsustainable lifestyle can whittle down ample funds until you have nothing to fall back on. For instance, you may be headed in the wrong direction when you spend a significant portion of your income on regular leisure travels, fine dining, and purchasing high-end cars without any financial cushioning.
Fortunately, you can save your future with timely lifestyle adjustments that align with your long-term financial goals, so feel free to consider this. Admittedly, putting an abrupt end to a lifestyle you’ve lived for years can be difficult. However, it would help to project into your future and all the financial goals you want to attain. It may be best to conduct an introspection to determine how sustainable your current lifestyle is. The answers rest with you, and the outcome will depend on the strategies you commit to, so keep this in mind.