Financial objectives – How to define and to achieve them

Financial objectives help you turn your dreams into reality.

That’s because in order to achieve any kind of dream, it’s essential that you define a plan to understand what needs to be done financially in order to achieve it.

Otherwise, you spend your whole life wishing for something and never organize yourself to achieve it.

Compared to financial goals, objectives are less specific.

For example, when setting a goal, it’s also common to choose a deadline.

But in the case of financial objectives, know that they represent a state you want to achieve in your life.

That’s why they are less specific in terms of deadlines and details than goals.

Examples of objectives include:

Financial security for emergencies: having enough resources to deal with unexpected situations without compromising your income.

Wealth building: accumulating assets and investments over time to provide future financial security for you and your family.

Differences between financial objectives and financial goals

According to the dictionary, an objective is what you want to achieve.

In this way, it is a purpose that shows where you want to go or what you envision for your future.

Changing your standard of living, going to university and buying a property are other examples of objectives.

Note that they always indicate a situation in the future which at the moment may seem unattainable.

This is precisely because financial objectives are broad.

As a result, we need goals to understand the path we need to take to achieve our dreams.

We can therefore define goals as subdivisions of an objective.

And when determining actions needed to achieve a purpose, goals must be specific and include deadlines.

In this way, they serve to bring objectives closer to reality, demonstrating that they can indeed be achieved, when a step-by-step approach is followed.

Another interesting way of explaining goals would be as follows:

They are small tasks that will be accomplished in order to achieve your purpose.

Examples of financial objectives and goals

Let’s assume that your objective is to live off a passive income.

To achieve this, you need to organize your finances and make investments.

Thus, organizing your finances is your first goal.

You do this when you work to get out of debt using the debt avalanche method, for example.

By learning more about emotional intelligence in finance, you also understand how to use your money wisely.

All of this is related to organizing your finances.

On the other hand, the second goal is to make investments.

To do this, you need to know your investor profile and which investment options are most profitable for you.

In general, fulfilling financial objectives of having a passive income should be done over the long term, because you need to meet small goals to achieve this.

Secondly, we can think of the objective of buying a property.

As goals, you can set the following:

Look for extra income options to increase your monthly salary, so that you save the down payment.

Another important goal would be to pay off the mortgage quickly.

To do this, as well as working harder, you should understand how financing works at your bank and how much of a discount you could get with this strategy.

Finally, think about whether your objective is to reach your first million by the age of 35.

To do this, you need to have financial control, create an emergency fund, learn about investing and actually start investing.

How to set financial objectives

First, consider your priorities.

Let’s assume that the last example of an objective is: you want to become a millionaire by the age of 35.

But the big problem is that you’re 25 and have loan and credit card debts.

Your credit card debts can be paid off in 1 year, but to pay off your loan debts, you would need 3 years.

Instead of taking on everything at once, having financial objectives of paying off credit cards and loans, as well as investing to become a millionaire, determine your priorities.

Therefore, you should initially worry about getting rid of your debts.

After that, you can set up small investment-related messages with the aim of reaching 1 million before the age of 35.

Also, in our article on financial goals, we mentioned the SMART method.

Basically, you need a specific, measurable, achievable, realistic and timely goal.

In the case of financial objectives, the same concepts can be applied, especially the idea of having achievable objectives.

Following the same example of becoming a millionaire by the age of 35, consider the following:

If you have a monthly income of US$2,000 and don’t intend to work any more for extra income, this is an unattainable objective.

If you put away 100% of your monthly income for 10 years, you won’t even reach half the amount you want.

And when we say that you should set achievable financial objectives, we’re not saying that you should get frustrated and give up halfway through.

When you realize that you won’t be able to fulfill your purpose, set goals until it becomes a reality in your life.

How do you achieve your objectives?

You’ve already understood that you have to turn your objective into small goals, but how do you do that?

For example, if your goal is to buy a house, you need to turn it into a goal through the details.

It might be interesting to set a objective of getting a house with a size of about 2,500 square feet.

As for the maximum cost, you might be willing to pay up to US$400,000.

Another important goal for meeting your financial objectives would be to save at least 20% as a down payment.

In other words, you would need to save US$80,000.

It’s also worth setting a target for how long you’ll pay off the mortgage.

It’s common to pay for your house in 15 to 30 years and you should analyze what’s best for you.

That way, you can start guessing.

In a period of 16 months, by saving US$, you can get the down payment.

If you only manage to save half the amount each month, it would take almost 3 years to get the down payment.

And, of course, we’re not taking income into account.

If you invest the money, you could get the down payment faster.

Does that make sense? So the better you define your financial goals, the greater your chances of success. 

Key objectives 

In our article on goals, we talked about goals that are essential, regardless of who you are.

In this article, we also think it’s important to talk about fundamental financial objectives in your life.

First of all, create a favorable credit history.

Don’t load yourself up with debt because your financial history will help determine your credit score.

And it’s through your credit score that your lender determines the terms of your mortgage, for example.

In other words, if you don’t take care of your credit history, you may have difficulty and even not be approved when you want to fulfill other objectives such as obtaining a home.

We also recommend that you think about financial freedom.

A person who has such freedom is able to support themselves for a certain period of time, even if their income is affected.

This person also has greater freedom with regard to their financial choices, being able to buy products they have always dreamed of.

Once you’ve achieved this freedom, make it one of your financial objectives to achieve financial independence.

In this case, you are completely free from your job and can continue to work, but this time not for the money.

A person who is financially independent is able to support themselves for the rest of their life because they have built up enough assets to do so.

Daniel 2 de April de 2024