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Financial Goal: Definition & Examples

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  • 0:00 What Are Financial Goals?
  • 0:21 Time Frame
  • 1:00 Saving Money
  • 1:35 Steps to Reaching a Goal
  • 3:29 Lesson Summary
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Lesson Transcript
Instructor: Paul Mckinney

Paul has been in higher education for 17 years. He has a master's degree and is earning his PhD in Community College Leadership.

In this lesson, you will learn what financial goals are as well as look at some examples. Goal length and the steps to achieving financial goals will be discussed.

What Are Financial Goals?

Financial goals are goals you set that revolve around finances or money. Financial goals are targets, usually driven by specific future financial needs. Some financial goals you might set as an individual include saving for a comfortable retirement, saving to send your children to college, or managing your finances to enable a home purchase.

Time Frame

When setting a financial goal, you must determine the length of time it's going to take to reach your goal. Your goal can be considered a short-term, medium-term, or long-term goal. Here are some examples:

  • Short-term goals are those that can be achieved in three months or less. For example, you might want to save $100 to buy an MP3 player in three months.
  • Medium-term goals are those that will take between three months to one year to achieve. For example, you might want to save money for six months so that you can take a trip during your spring break.
  • Long-term goals take more than one year to achieve. A long-term goal could be paying off your student loans early, by paying an extra $200 a month.

Saving Money

Why do people and organizations set goals to save money? It's simple - they want to earn a fee or interest for saving their money. For instance, someone could invest $100 in a bank savings account for one year at a 6% annual interest rate. At the end of the year, the person now has $106 in the account. In other words, the future value of the $100 is $106, given a 6% interest rate in a 1-year period. It follows that the present value of the $106 the person expects to receive in one year is $100 today.

Steps to Reaching a Goal

Setting financial goals is often a smart choice and can be very rewarding. When you set a financial goal, you define what you want and develop a plan for achieving it. Instead of wandering aimlessly, you have something to strive for and a clear path for getting there. Let's review the steps that should be followed to reach any financial goal:

Step one: Define what you want to accomplish. The first step in achieving any goal is determining what you want to accomplish. Do you want to pay off credit cards, save for a new car, save for college, etc.?

Step two: Write down your goals. When you write down your goals, you are more likely to achieve them. This will also help you assess what you really want.

Step three: Be realistic. Set a reasonable goal. You can always revise your goal in the future, depending on how you're doing with your plan.

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