Financial goals: how to set them and avoid debt

Posted on 20 January 2024

Written by Ashvin Sharma

Many of us know just how important it is to have financial goals in place in order to try and achieve financial wellbeing, and to achieve the things we want most out of life. Whether you plan on raising a family or purchasing a property, setting financial goals is a good place to start. With that said, it can be difficult to know where to begin. Perhaps you feel like you are trying to make the right decisions with your money, but do not seem to be getting any closer to where you want to be. At Spergel, we understand that navigating your finances can be challenging, but getting carefully considered financial goals in place is a key step towards securing a stable future while avoiding unnecessary debt. In this article, we will explore effective ways for setting financial goals, as well as the steps to meet them. We have been helping Canadians on their journey to a fresh financial future for over thirty years, and we are here to help you too.

What are financial goals?

A financial goal is a plan you have for your money. These can be both short-term and long-term. Short-term goals might include saving a small pot of money, while long-term goals might be buying a property or investing for retirement. You should ideally set financial goals for each part of your life. Any financial goals you have should be specific to ensure you are aiming for what you want out of life, and can plan and save accordingly. It might feel overwhelming to know what to do with your money as there are so many options. But by being selective and focusing only on the things you really want, you can set yourself up for lifelong success. At Spergel, our expert Licensed Insolvency Trustees have worked with individuals in all kinds of situations, and we are here to help if you are feeling overwhelmed by your finances. It is important, first of all, to know how to get into the mindset of setting financial goals. 

Where to begin with setting financial goals

There are many factors that will impact how you set your financial goals, including your motivations, values, and visions for the future. Your spending and savings habits will also impact how you handle your finances. Planning out your goals will take self-awareness and careful consideration of what you want to achieve. Be ambitious yet realistic, and once you have a list of goals for your money, you can then break them down into manageable steps.

How to set your financial goals

Here are some key steps for setting your financial goals:

Assess your current financial situation

Begin by taking stock of your current financial status. Evaluate your income, expenses, assets, and debts. This honest assessment can then form the foundation for setting realistic and attainable financial goals.

Define your short-term and long-term goals

Clearly outline both your short-term and long-term financial goals. Your short-term goals might include building an emergency fund or paying off credit card debt, while long-term goals could involve saving for a home, education, or retirement. Having a mix of both kinds of goals provides a balanced approach to financial planning. Short-term goals are typically tackled within the next five years or so, and long-term goals are usually goals you will achieve in five years or more.

Make your financial goals SMART

In order to stand any chance of your goals being met, you need to make them SMART – Specific, Measurable, Achievable, Relevant, and Time-Bound. This framework means you avoid vague goals (‘save money’), instead making them specific and within a defined timeframe (‘save $5,000 by the end of the year’). Deadlines should be reasonable, but also a little challenging to help spur you on.

Prioritize debt repayment

If you have outstanding debts, you should make debt repayment a priority. You may want to create a plan to systematically pay off your high-interest debts first, like credit cards. Paying off your most expensive debts first is known as the debt avalanche method, while paying off your smallest debts first is the debt snowball method. At Spergel, we are the ‘get rid of debt’ people. Our Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief, meaning we are well placed to review your finances and to advise you on the best actions to take. Book a free consultation with one of our experts today to get started. By allocating a portion of your income specifically for debt repayment, you will accelerate your journey towards financial freedom.

Build an emergency fund

Establishing an emergency fund is a crucial component of financial stability. You should ideally aim to save three to six months’ worth of living expenses in a readily accessible account. This fund acts as a safety net during unexpected financial challenges, preventing the need to accumulate debt when life throws surprises your way.

Develop a realistic budget

You should develop a realistic budget that aligns with your financial goals. Categorize your spending, identify areas for potential savings, and allocate funds accordingly. Regularly revisit and adjust your budget as needed to stay on track with your ambitions.

Explore investment opportunities

You may wish to investigate investment options that will help you to grow your wealth over time. Consult with financial professionals to make informed decisions based on your risk tolerance, financial goals, and timeframes.

Seek accountability for your financial goals

Did you know you are far more likely to achieve your financial goals if you keep them written down? It can help your brain to better commit to your goals. Whether you keep them documented in the Notes app of your phone, or have it as your wallpaper so it is the first thing you see when you reach for your phone, try keeping them where you can see them to stay on track and motivated. An accountability buddy is also a great idea. Whether a family member or a friend, having someone to encourage you and check in as you work on your goals can make a huge difference.

Gain professional guidance

Consider consulting with an experienced Licensed Insolvency Trustee to receive personalized advice tailored to your unique circumstances. Professional guidance can provide valuable insights and strategies for achieving your financial goals while avoiding – and even eliminating – unnecessary debt.

Why is setting financial goals so important?

Having financial goals helps you to be more future focused with your money. You will begin to think twice about each decision you make when spending. And, all these individual actions will soon add up to make a big difference to your overall financial health. Without financial goals, you might be more carefreeabout your spending, because you have no clear targets to aim for. It can mean each of those takeouts or Timmy’s trips soon add up, whereas with goals you could be putting this money towards something else. If you are keen to achieve financial wellbeing, it is these small sacrifices that you can make right now to affect your future. Financial goals help to change your thinking, your actions, and your habits. 

Financial goals – FAQs

What is an example of a financial goal?

Examples of financial goals could be saving for a down payment on a home. For instance, you might set a specific financial goal of saving 20% of the home’s purchase price over a certain period, which is a typical down payment requirement in Canada. This could involve creating a budget, cutting unnecessary expenses, and consistently contributing to a savings or investment account to reach the desired amount. Other examples of financial goals include:

  • Building an emergency fund
  • Investing for retirement
  • Paying off debt
  • Saving for education
  • Increasing your income

It is important for you to tailor your financial goals based on your unique circumstances, priorities, and timelines.

Setting financial goals is a fundamental step towards securing your financial future and avoiding debt traps. At Spergel, as the ‘get rid of debt’ people, we’re committed to helping you achieve your goals and overcome financial challenges. By prioritizing debt repayment, building an emergency fund, and seeking professional advice, you can navigate your financial journey with confidence. To get started, book a free consultation with an expert at Spergel today.

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Ashvin Sharma

Ashvin Sharma is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) overseeing all of Spergel's offices in the Greater Vancouver Area and British Columbia. He is also our resident expert on homeownership debt and health debt. In his spare time, Ashvin loves to play sports, spend time with family and friends, and serves as a volunteer coordinator for "Free-Them", a Canadian organization committed to raising awareness about human trafficking.

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