Without setting specific financial goals, it’s difficult to build a sustainable nest egg that can eventually be turned into a stream of retirement income. In this blog, La Ferla Group clarifies why financial goals are necessary, provides examples of goals and how to achieve them.
Breaking Down 5 Common Financial Goals
1. Provide Family Security
Why it’s necessary
One of the most common financial goals is to build wealth that can be passed down to future generations of family. Chief household earners want their family members to be financially secure in the event that they’re no longer able to work, whether due to injury, illness or death.
How to achieve it
Investing in a diverse range of assets helps provide a sustainable, steady stream of income. Exactly how money is allocated across those assets will depend on the investor’s age and risk tolerance.
2. Retire Comfortably
Why it’s necessary
There’s no guarantee that one may retire comfortably, or even retire at all. According to Gallup, the average retirement age, is 66. During the 1990s, it was 60.
How to achieve it
People who enjoy fruitful, fulfilling retirement years have usually set numerous savings goals through their retirement years, and achieved them by utilizing funds like 401(k)s and Roth IRAs.
In a recent blog, La Ferla Group broke down the average retirement savings by age that would be necessary for one to retire comfortably by the age of 65.
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3. Have an Emergency Fund
Why it’s necessary
Whether it’s for a natural disaster that damages property or a medical crisis that takes a toll on both health and finances, having an emergency fund is crucial. A sizeable emergency fund can prevent an emergency from becoming a crisis that accrues additional debt.
How to achieve it
One rule of thumb many Certified Financial Planner™ Professionals recommend is to allocate three to six months of living expenses to an emergency fund. The money should also be placed into one’s main bank account, so the temptation of withdrawing emergency money is lessened.
4. Pay Off Debt
Why it’s necessary
Debt accrued from credit cards, car payments, college, mortgages and more is one of the biggest financial burdens Americans face. In fact, American households have amassed $13.2 trillion in debt. For many families, paying off debt equates to financial freedom.
How to achieve it
Common ways to attack debt and pay it off include:
- Paying more than the minimum required payment
- Investing aggressively at a young age
- Avoiding common debt payment mistakes
Debt situations vary from person to person, so meeting with a Certified Financial Planner™ Professional is recommended.
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5. Higher Standard of Living
Why it’s necessary
While this financial goal isn’t necessarily a requirement, most people would like to attain a higher standard of living. Generally, the more income one earns, the more they can afford to spend on recreation, like vacations and nicer cars.
How to achieve it
The main way people achieve a higher standard of living is by constantly building upon their nest egg during their working years. By having a considerable sum of money saved and ready for future use, they are able to use the rest of their income on other things.
These are just five of many financial goals one may seek to achieve. For any questions, contact a local wealth manager or Certified Financial Planner™ Professional.
