How to Set Personal Financial Goals and Reach Them

TL;DR

Personal financial goals are the monetary objectives you set to take control of and manage your finances. There are many ways to reach your personal financial goals, from monetizing your hobby to drawing up a savings plan. As the cryptocurrency industry grows, it’s becoming another potential tool for meeting personal financial objectives.

What Are Personal Financial Goals?

Setting personal financial goals is the first step towards properly planning out your personal spending, earnings, savings, and investments. Without a goal, it’s hard to budget for how much you can spend and how much you should save. You’d also find it difficult to work methodically towards putting your personal finances on solid footing. In fact, research has identified that setting the right goals is linked to greater success.

These goals differ from person to person, depending on various individual factors. For some, it could be to save $1,000 every month. For others, it’s reaching $10 million in net worth. There are different strategies to reach your financial goals, but the two central methods are always to reduce spending and increase income.

How to Set Your Personal Financial Goals

When it comes to goal-setting, it’s important to use the widely-recognized SMART method, which stands for specific, measurable, action-oriented, realistic, and time-bound.

Personal financial goals need to be specific and measurable. Aiming to save $1,000 per month is specific and measurable, whereas saying you’ll save “some” money is not. These objectives also need to be action-oriented. For example, limiting your monthly spending to 50% of your salary requires action, but “I want to be rich” is too vague an objective that’s not action-oriented.

It’s also essential to create goals that are realistic and set within specific time frames. One common method is to organize your goals according to short-term, mid-term, and long-term goals.

Short-term goals can be accomplished within a few months or a year, mid-term goals (such as becoming debt-free or saving for your child's education) up to five years, and long-term goals (such as buying a property or investing in a retirement fund) more than five years.

It’s good practice to always attach deadlines to your financial goals. Growing your investment portfolio to $10,000 by the end of 2023 is more likely to motivate you than the same goal without a deadline. Additionally, if you have multiple financial targets, make sure to plan and prioritize them carefully.

For instance, if you want to buy a property in 10 years, you can work backwards from saving for a $200,000 down payment to determine how much you need to save each month.

Strategies to Achieve Financial Goals

There are two main approaches to meeting your financial objectives: reducing spending and increasing income.

Reduce spending

Track your spending: Before you can cut your spending, you need to understand where your money is going. Monitor your spending habits for a month and record all your expenses.
Create a budget: Impose a limit on your spending to manage your money better by adjusting your spending habits and cutting down on unnecessary expenses.
Live within your means: Spend less than you earn; sticking to a budget can help you avoid overspending. Also, try to avoid impulse purchases. It can be tempting to buy something on a whim, but wait for at least 24 hours before making a decision.
Save consistently: Make sure to save a specific portion of your income each month. For instance, you can aim to save at least 10% of your monthly salary.

Increase income

Savings with interest: Maximize your savings by putting them in an interest-bearing savings account.
Side hustle: If your main job allows, take on a part-time job to generate extra income. You could explore the gig economy or even start your own business. If you have a hobby, think about how to monetize it.
Passive income: Passive income is income earned without having to actively work for it. This type of income is often generated from investments, such as crypto, forex, stocks, and bonds. Other types of passive income include royalties from intellectual property and rental income.

How Crypto Can Help Achieve Your Financial Goals

Start a crypto savings account

If you’re not interested in active trading, you can consider generating passive income from your crypto holdings through a crypto interest-bearing savings account. Deposit your digital assets and earn interest on them instead of letting them stay idle.

Spend with crypto cards

When purchasing necessities, look for deals that allow you to save when you spend. This includes cashback reward programs and crypto cards that allow you to get back a percentage of your purchase amount in the form of credit, cash, or crypto.

Start a crypto reselling business

Thinking of taking on a new income stream? Consider reselling or distributing crypto gift cards to earn a profit. Crypto gift cards allow users to top up their crypto accounts and pay for goods and services conveniently and securely.

Become an NFT artist

Monetizing your hobby can be a great way to turn something you love doing into a profitable venture. If you’re a creator, there’s a billion-dollar market for non-fungible tokens (NFTs). There are numerous NFT marketplaces that allow artists to mint their own media creations and kickstart their NFT creator journey.

Invest in crypto to diversify your portfolio

Diversification is a risk mitigation technique commonly used in investment management. Crypto can be used to diversify one’s investment portfolio, though how correlated crypto markets are from other financial markets is debatable.

Ultimately, investing in crypto may be suitable for some investors as a diversification tool, depending on one’s risk appetite and investing style. Always remember that crypto investing is risky and not meant for everyone. For a step-by-step guide to crypto investing, start here.

Tips for Using Crypto to Reach Your Goals

DYOR

Crypto has its merits as an investment vehicle, but it also involves taking risks that other income-earning opportunities like freelancing do not entail. Hence, remember to always do your own research (DYOR) before taking on any financial risk. There are many ways to do so, and the more extensive your research, the more adept you’ll be at identifying potential risks.

Risk management

Risk management is a critical tool for investing or trading success. A good general rule to follow is to invest only as much as you’re willing to lose, and employ strategies to protect your investments. For starters, read A Beginners Guide to Risk Management to learn how to manage your assets responsibly.

Understand crypto tax liabilities

If you’ve started working towards your financial goals by investing in crypto, the next step is to understand and address your crypto tax liabilities. In some jurisdictions, a penalty may be imposed if you don’t pay the required taxes on your crypto earnings.

Closing Thoughts

Depending on your comfort level, current needs, and priorities, there are several ways to reach your financial goals. Some of these strategies can be used in combination with one another or on their own, depending on your preferences.

Regardless of your approach, remember not to rush into any potential financial opportunity, crypto or otherwise. Rushing in with a “high risk, high reward” mentality may backfire and set you back on your goals.