Debt is a common challenge among Americans. In Q4 2023, the average household debt in the US rose to $17.5 trillion. The number encompasses mortgage, credit card, auto, and student loan debts.
Not all debt is bad. However, it can hinder your financial independence if it spirals out of hand, making it hard to save or invest for the future. The best approach to this obstacle is setting practical financial objectives.
Whether paying off debt, saving up for emergencies, or planning for retirement, a realistic plan of action gives you a sense of direction and concrete steps for progress. Here, we’ll discuss examples of financial goals worth considering for 2024 and strategies to hold yourself accountable.
Understand Where You Stand Financially First
Before setting financial goals, it’s vital to know your current financial situation. This involves assessing how much you earn, spend, and owe.
Understanding where you are financially helps you establish goals that make sense. Thus, take some time to gather details about your bank accounts, any money you owe, your credit score, and other relevant financial information.
7 Financial Goals To Focus on for 2024
A financial goal is a concrete plan for handling your finances. It empowers you to decide where to spend your money and set it aside for short-term and long-term objectives. These goals can vary from one person to another based on their life stage, values, motivations, and financial situation.
It’s crucial to ensure your goals meet the SMART criteria.
- They must be specific. Clearly define what you want to achieve.
- They must be measurable. Set your goals with specific numerical targets so you can measure and track your progress.
- They must be achievable. Consider your current circumstances, resources, and abilities to ensure your goals are realistic and attainable.
- They must be relevant. Align your goals with your personal needs, values, and limitations.
- They must be time-bound. Give yourself a specific and reasonable deadline to achieve each goal.
Following this criteria allows you to decide on meaningful financial goals that can improve your financial well-being. Suppose you’re unsure where to start. Here are some typical financial goals to focus on in 2024:
1. Establish a budget and stick to it
Every financial goal begins with a budget. It’s the starting point of getting your finances in order and making wise choices with your money. A budget is a plan for your money. It lays down your income and expenses for a particular period, usually short-term.
With a budget in place, you can feel more confident in allocating funds toward your goals. Most budgeting tools suggest putting away around 20 percent of your monthly earnings. You can use this money for unexpected expenses or keep it in a savings account to grow over time.
2. Improve your credit score
A good credit score makes it easier for you to qualify for loans with favorable rates and terms. Hence, it’s crucial to your financial health. Ideally, a good credit score is 700 and above.
Aim for a specific increase in your credit score by setting a target figure. But before doing so, check where your score currently stands. A credit score tracking tool from SoFi can help you monitor your credit score. Likewise, you’d be able to learn the factors affecting your score and ways to improve it.
3. Maintain a dedicated emergency fund
Unpredictable situations can happen anytime, so being ready for surprises is wise. A dedicated emergency fund will be your safety net for unexpected expenses.
Allocating money enough to cover your living expenses for three to six months is an excellent financial goal. Secure the fund in a high-yield savings account, where you can withdraw it easily.
4. Pay down your debts
If you have high-interest debt, it can keep you from making progress with your finances. Consider prioritizing paying off your debts, especially those that incur the most interest.
Several debt repayment strategies are available to help you clear debt faster, such as debt snowball or debt avalanche. After paying off one debt, you can use the money you used to spend on that debt to pay another one. Keep repeating the process until you eliminate the last remaining debt.
5. Build retirement savings
Saving for your retirement fund is a critical financial goal. It helps ensure you have enough money when you’re older. You can use accounts like 401(k)s or IRAs to save for retirement. Before that, take the time to estimate how much money you’ll need to live on each year during that period.
If available, try to put in enough money to get the total amount from an employer-sponsored retirement plan. Moreover, think about contributing a higher amount as your financial situation allows. Check your retirement plan now and then to ensure it’s still suitable for your long-term goals.
6. Allocate funds for investments
Investing is a significant financial goal for accumulating wealth over time. You can allocate funds for stocks, bonds, or real estate investments. Remember, diversifying your investment is a good idea. Doing so can help you minimize possible losses and make reasonable returns.
Whether you’re a beginner or an experienced investor, keep learning about different investment strategies to make informed choices. You must ensure your investments match your risk tolerance and long-term financial goals.
7. Create multiple income streams
Relying on a single income source is not ideal and can be risky. You might struggle if something happens, like losing your job or an economic downturn. Creating multiple income streams is an excellent goal to make you less susceptible to financial instability.
You could try doing extra jobs, working as a freelancer, renting out a property you own, or investing in stocks that pay regular dividends. Having more than one way to make money helps increase your income. It also protects your finances if something goes wrong with one of your income sources.
Reach Your Financial Goals
Setting and tracking clear goals gives you the foundation to pursue your desired financial future. It empowers you to be more intentional about handling your money and reach where you want to be financially. But, like any goal, it’s a process that you need to monitor.
Know that your priorities and needs may change, and other factors beyond your control may affect them as you progress. So besides holding yourself accountable, being flexible with financial planning and adjusting it accordingly is equally crucial.
