The global economy recognizes that the U.S. is among the richest countries in the world. However, many U.S. citizens are suffering from financial difficulties largely attributed to poor financial management, especially in utilizing credit. Another contributing factor to financial problems is the ease in availability of products boosted by extensive ads. Individuals can avoid or reduce their financial problems by setting personal financial goals and objectives.
Setting Financial Goals
Establishing the financial goals you intend to achieve is the first step toward efficient personal finance management. The SMART principle — specific, measurable, attainable, realistic and time bound — is a useful formula to follow in setting your financial goals. Setting a specific goal helps you focus on your objectives by answering questions as to who, what, when, where and how you shall achieve your goals. Measurable goals apply metrics to rate your progress. Attainable and realistic goals are those that you are likely to achieve given your capabilities and resources. "Time bound" refers to the set schedule for achieving your goals; this gives you a sense of urgency.
Prioritizing your Goals
Financial goals may sometimes conflict. For example, a decision whether to pay for a medical checkup or to save the money. You have to prioritize which goals are important and which goals you can achieve in the future. After arranging your goals by order of importance, you need to determine the time frame for achieving them. This depends on the life situation you are facing. For example, financial goals set when you are young and working vary from those set when you are old and facing retirement. Re-evaluation of goals is essential with progress in life. For example, in the event that you get married, you need to accommodate the financial needs of your family.
Possible Problems and Solutions
You may suffer obstacles in the path to achieving your financial goals and objectives. To avoid dire consequences on your financial status, you can make a list of possible obstacles that may affect the attainment of your objectives, such as loss of income, conflicting priorities, medical emergencies or theft. Devise a possible solution you can embark on to address each hypothetical problem. For example, in case of loss of income, you may have your own small-business venture to fall back on, or to ensure financial stability in case of a medical emergency, you can invest in a health insurance plan. Such planning gives you a plan of attack if problems arise.
Invest in Savings
CNN/Money emphasizes the importance of saving in the interest of achieving personal financial goals and objectives. Savings accounts, for example, help prevent impulse withdrawals. The compounding interest helps you achieve long-term goals. It is more beneficial to embark on a savings account when you are young. The federal government allows you to purchase savings instruments, including savings bonds and Treasury bills. Individual retirement accounts, on the other hand, are useful for setting aside funds to use upon retirement; these accounts offer tax advantages. Ensure you maintain financial discipline, and utilize your savings only for the achievement of financial objectives.
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