How to set financial goals

September 22, 2023  |  Scalable Capital
Are you thinking of investing? If you have not yet set your financial goals, this step by step guide will help you to get started.

Setting the right financial goals is the key to gaining the financial security you need to plan for your future. Maybe you want to save for retirement or perhaps set aside a sum for your dream home. Whatever the scenario, planning your financial investment correctly will help you achieve your desired outcome on schedule. Read in our article about the steps to stay on track and make informed decisions.

Why it is important to set financial goals

In any aspect of life, having a plan allows you to illuminate the path you need to complete to realise a dream or a good purpose. The same applies to financial goals: although they may vary according to one's means and ambitions, they allow one to compose a kind of map that is useful for understanding how to invest and for keeping track of time or results.

With meticulous planning, every little milestone you achieve will help you reach your final goal. To this end, financial goals should be:

  • Measurable
  • Well defined and specific
  • Relevant to you and your needs
  • Relating to a limited time frame
  • Achievable

  • As you can easily guess, setting up a financial investment plan is easier if you have a direction to follow. Moreover, it is a good opportunity to think about the short and long term, addressing potential problems before they even arise.

    Long-term vs. short-term financial goals

    We have already anticipated that financial objectives must be referred to a certain period. The time horizon is a fundamental fact in the world of finance and must be one of the first variables considered. But what differentiates short-term and long-term investments? In general, short-term refers to cycles of less than two years, while long-term refers to much longer, more than ten years. These timeframes refer to the period during which savings invested in bonds, shares or other financial products could remain tied up, as well as the income they have generated.

    There is no universal formula for choosing what to invest in, since any form of investment involves a level of risk. Certainly, however, defining your financial objectives can reveal a much clearer picture of your situation and dictate the composition of a possible portfolio.

    3 steps to create your financial goals

    Let's get to the heart of our article, the steps to better plan your investment goals: here they are.

    Step 1: Get informed

    Creating financial goals requires a minimum level of literacy on the subject. Try to get to grips with the basics of finance, such as the difference between types of investments and what interest rates are. Just surf the Internet to find out more: get informed and learn how to invest consciously. You don't need much experience, but having a natural curiosity for this field can pave the way. In this regard, our section dedicated to financial education can help you.

    Step 2: Assess your situation

    After delving into how the financial market works and what the main mechanisms are that regulate it, take out a pen and paper (or even your smartphone, whichever is more convenient). Chart your income and expenditure to get an idea of the actual numbers. Consult your pay slips, your monthly bank statement for the last few years and anything else that may affect your financial planning. Did you receive unexpected money as a result of an inheritance? Even better: you will have more freedom to compose your portfolio.

    Step 3: Set a budget

    To turn your financial goals into reality, you must first identify an amount to invest. A commonly recommended approach is the 50-30-20 approach, which consists of dividing your monthly income into three categories. According to this method, about half of the income should be allocated to essential needs, such as the supermarket and the mortgage payment. Of the remaining part, about 30 % should be reserved for leisure, such as restaurants and shopping, while the remaining part, savings, could become the monthly budget to be allocated to short-term or long-term investments. Indeed, remember that time is a very important factor in achieving financial goals and that the duration of any investment must be well thought out.

    Thinking about your tomorrow? Discover Scalable Broker and start planning your financial investments.

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    Author Scalable Capital
    Scalable Capital
    Broker with flat rate
    Scalable Capital is a leading fintech in Europe that brings people and technology-based investing together. Scalable Capital offers a broker with a trading flat rate that enables customers to trade shares, ETFs, cryptocurrencies and funds themselves and to conclude savings plans.