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7 Financial Goals to Set You Up for Success

The key to financial success is setting achievable financial goals — whether it’s early retirement, getting debt-free or just saving a certain amount of money.

Author Justin Cupler
Contributing Writer at Tally

A good goal can keep you motivated, but one that’s too hard, vague or impractical usually gets forgotten. When it comes to money, goal-setting helps steer us in the right direction, but you need to start off right by choosing goals that work for you. 

Here are seven financial goals to help get your finances moving toward future success.

1. Jumpstart Your Financial Goals by Creating a Budget

calculator, pen and budget to calculate financial goals

The financial goal that’ll help lead you to success in all your goals is to create a budget. This simple step gives you the bird’s-eye view of your finances so you have a clear picture of how your money flows and where you can adjust the flow to meet those goals. 

It all starts with thorough planning. First, you must outline your financial goals, gather your various sources of income and pull together all your expenses — even that $1-per-month app subscription you forgot about for the past year. 

One thing to remember is that a budget is not a set-it-and-forget-it thing. It is a living document you’ll have to visit at least once a month to make tweaks as needed.

There are various online tools and apps that connect to your bank account to automatically pull transactions and categorize them, which makes this task simpler. If you prefer the less technical route, the Consumer Finance Protection Bureau offers a quick budget worksheet you can fill out to see where you stand.

If you find yourself in a deficit, this is when you have to set firm priorities and stick to them. Is that Netflix subscription putting you in the red? Is your $5 cup of gourmet coffee every morning making it harder to pay your water bill? These are the types of expenses you can cut to help make ends meet.

Do you have some extra money after adding it all up? Perfect — now you can choose whether to pencil that extra cash in as “fun” money you can spend, save or split between the two.

2. Check Your Credit Report

Your credit report is basically your financial permanent record, and it will follow you everywhere you go. What’s more, it takes 7-10 years for any bad marks to stop trailing you.

This is why one of your yearly financial goals should be to pull your credit report and verify all the data is accurate. Fortunately, there are numerous ways to do this. 

Free Annual Credit Report

The federal government requires the three major credit bureaus, Experian, Equifax and Transunion, to provide you with one free credit report per year. You can go to AnnualCreditReport.com to get all three reports in one place. While this site won’t provide you with a free score, you can check if there are errors. 

Independent Free Credit Score Sites

They seem to crop up overnight and market their free services everywhere. We’re talking about the wide range of free credit score sites, including Credit Karma, Credit Sesame and Credit.com.

These sites do soft pulls on your credit — one that will not impact your credit score — to collect your credit accounts, balances, and payment histories. They then populate then in easy-to-navigate interfaces and even offer all three scores for free.

Are these free scores accurate? According to CNBC, likely not. In its research, CNBC found Credit Karma “provides scores from the VantageScore model” and not FICO, which is what 90% of all consumer lenders use. This is why in some cases you can see huge differences in these free scores versus what a lender provides you.

These free scores may not be great for estimating your real score, but they are convenient ways to watch for patterns without incurring expenses.

Understanding Your Credit Reports and Fixing Errors

Understanding your credit reports may seem virtually impossible at first, but it’s actually simple once you know what you’re looking for.

Each report will have a list of accounts that are under your Social Security number or that you’re an authorized user on. Keep in mind that not every account will be on each bureau’s report, as some creditors only report their data to select bureaus.

Each account will list the creditor, your balance and your payment history with positive or negative marks. When you pull this report, you’ll want to immediately go through all the accounts and balances.

If you notice there is an account or balance you don’t recognize, you can dispute it through that bureau. Once you file a dispute, the creditor has a certain number of days to respond with documentation proving you owe the debt. If the creditor cannot produce this information, the bureau will remove it from your report.

3. Boost Your Credit Score

woman looking at smartphone outside

If your credit score is 650 or lower, one of your financial goals should be to boost that score.

A higher credit score not only feels great, but it also can help you meet other financial goals. For example, a higher credit score may allow you to get a 0% interest credit card that you can roll high-interest balances on and save cash. Or you can refinance your home to a lower rate and save on your mortgage. 

Believe it or not, a higher credit score can even help you save on your car insurance. In most states, car insurance companies use your credit score as an indicator of risk and charge you more if your score is low. 

What’s great about credit scores is that they can change, so with a little work, you can fix yours. 

Disputing Bad Accounts

As mentioned above, disputing accounts you don’t recognize or remember is a great way to rectify errors. On top of getting that bum account out of your name, this can also boost your score if the account was in bad standing. 

Consolidating Credit Card Debt

Too much credit card debt can drag down your score, especially once the balances creep over 30% of the credit limit. You can always pay them down, but this can be time-consuming. Using a debt consolidation loan or a low-interest line of credit will drop these balances. Plus, a close-ended loan has a far less negative impact than a large revolving debt like a credit card. 

Contact Outstanding Collections and Settle

Collection calls can be irritating, so why call them? Well, because it can save you a lot of headaches, cash and points on your credit score.

Call any outstanding collections accounts on your credit report, preferably from a blocked number so they can’t call you if the settlement offer falls through, and offer to settle the debt. The collections company will either offer you a lower cash settlement or tell you they do not offer settlements.

If they offer a settlement that is worthwhile, take it and pay the debt off. While the collection will likely remain on your credit report, it will be a $0 balance.

Two things to remember:

  1. According to the Fair Credit Reporting Act, most debts must be removed from your credit report seven years after they first went delinquent. So if you have a collection account that is over 6 years old, you may want to wait the rest of the year instead of settling. 
  2. Never admit to or acknowledge you created the debt, as there are some laws that allow shifty collection companies to reset that seven-year debt-fall-off clock.

4. Build an Emergency Fund

jar with coins spilling out

A common financial goal and one you should aim for is to create an emergency fund to cover you in case something unexpected happens. If you get laid off, the roof collapses or your car needs $1,000 in repairs, this emergency fund can help cover your expenses without whipping out a credit card. 

How Big Does My Emergency Fund Need to Be?

Start by adding up your monthly expenses to see just how much money you need to keep you going each day. This should only include the most essential elements like the rent or mortgage, electricity, water, trash, car payment, internet (for job searches), phone, groceries and other necessities.

Most experts recommend saving 3-6 months’ worth of these expenses, so multiply those monthly expenditures by at least three and up to six. That is how much you should plan on saving.

For example, if you have $2,000 in monthly essentials, you would want to save $6,000-$12,000.

That may seem like a lot, and it is, but there is no rule saying this must happen overnight. Many financial advisors agree that starting with a $400-$1,000 emergency fund and building on that slowly is just fine.

If you’re uncomfortable with a slow-paced savings plan, you can speed things up by freeing up extra cash in your budget in several ways:

  • Deferring student loans
  • Taking on a side hustle
  • Cutting unused subscriptions
  • Asking for cash in lieu of gifts
  • Moving large credit card balance to 0% cards to lower payments
  • Deflecting tax refunds into your savings

Automate Your Emergency Savings

If you’re just not great at saving cash and forgetting about it, you can use a tool to automate your savings and stuff it in an account you never see. There are plenty of savings apps that offer automated savings.

These apps also offer round-up savings, which is when they round up your debit card purchases to the next dollar, then whisk those extra pennies away into an account. Some banks offer this service, too, and those pennies really add up. 

Plant the Emergency Fund Seed and Let it Grow

Once you get a nice lump of cash saved for a rainy day, split it in half and put one half in an easily accessible high-interest savings account for quick access. Dump the other half in low- to moderate-risk stocks and watch that emergency fund build itself.

5. Lower Your Debt

Getting debt-free is a financial goal for people from all walks of life. With most credit card rates hovering in the 15-29% range, eliminating credit card debt is generally the first target to reach financial success. 

There are several approaches to getting debt-free, and some are more drastic than others.

Working With a Debt-Settlement Company

Debt settlement companies are all over the place and vary greatly in quality. But their goal is to negotiate your balances with your credit card company and help you manage paying off these negotiated balances one by one. 

The big issue is that many of these companies must first allow your credit cards to fall into default before the creditor will be willing to negotiate. This will result in an initial — sometimes significant — dip in your credit. 

While they wait and negotiate, you pay a fixed amount into an account. Once there is enough in that account to pay off a credit card, they pay the pre-negotiated settlement amount, and the card company closes the account. The closed account can cause another dip in your credit score.

You continue paying the monthly fee until the debt-settlement company pays off all your cards. 

While you will generally save money, the potential drop in your credit score and the fact that this company will charge you a fee (sometimes in the thousands of dollars) may be a deterrent

Working Directly With Your Credit Card Company

No, you don’t always have to go to a debt-settlement company to settle credit card debt. You can also do it yourself. This requires a lot more legwork than using a debt-settlement company but can save you thousands in fees.

Contact each financial institution and explain your hardship to a representative to see what your options are. Depending on the company’s policies, the rep may offer to defer a payment, reduce your interest rates or even settle your balance for a fraction of the balance. In many cases, though, companies will only offer the latter when you are already delinquent. 

Debt Snowball

The debt snowball debt-reduction plan is one of the more popular for debtors who don’t have a ton of expendable cash to toss at their credit cards.

With this plan, you pay the minimum payments on all your cards, except the one with the lowest balance. You funnel all the extra cash you can afford toward the card with the lowest balance until it is paid off. Once you pay off that card, you roll the entire payment you were paying on top of the minimum payment on the next-lowest-balance card until it is paid off. You continue this trend until all your cards are paid off.

While this system works great for those on tighter budgets and is great for those who like to see balances quickly dropping to $0, its downside is you end up paying a lot of interest on your higher-balance cards. 

Debt Avalanche

The debt avalanche works the same way as the debt snowball, but you attack the card with the highest interest rate first. As you pay off each card, you again roll the entire payment you were making on that card on top of the minimum payment of the card with the next-highest interest rate. 

Though this is a great way to save a lot in interest, you will not get the quick $0 balances you may need to keep your momentum. 

0% Transfer Consolidation

This debt payoff trick requires a perfect situation to make it work, but it can save you tons in interest and lower the monthly payments it’ll take to eliminate your debt.

If you have multiple lower-balance cards and have access to a card with a $0 balance that has a 0% APR transfer offer, you can transfer those smaller balances onto that 0% card and pay no interest for 12-24 months in some cases.

This is a great way to easily pay off debt with the least amount of interest. The downside is that it requires an existing card or getting a new credit card with the available credit to transfer all your balances. Also, most  0% transfer offers come with sneaky 3-4% transfer fees that can add up if you have a lot of debt to move. 

6. Boost Your Retirement Savings

couple in retirement discussing financial goals outside at sunset

Part of any good financial planning session is a discussion about where your retirement savings are at. In today’s world, these accounts are dangerously low, and we all need to pad our retirement accounts

Luckily, there are plenty of ways to increase these savings without putting a strain on your cash flow. 

Meet Your Employer’s Match

An instant shot in the arm for your retirement accounts is to meet your employer’s 401(k) match. Virtually every employer that offers a retirement savings plan has some type of 401(k) — for example, a 50% dollar-for-dollar match up to 6% of your salary. In this case, if you earned $100,000 per year and put $6,000 into your 401(k) per year, your employer would automatically deposit another $3,000. That’s free cash, so take advantage of it. 

Automatically Increase Your Savings

Many companies’ 401(k) administrators understand today’s struggles and offer tools to help you save more. One tool is the automatic incremental increase, which allows you to automatically increase your 401(k) contributions by a set percentage every year. If your company offers this, set it to at least a one percentage point increase per year.

Why one percentage point? Because it is small enough for you not to notice the difference in your financial situation but large enough to make a difference in your 401(k) over time.

Also, if you get a raise this year, funnel some or all of that extra cash directly into your 401(k), and just maintain your current living style. You’ll thank yourself later.  

Fast-Track All Extra Cash to Your Retirement Account

When it comes to holidays or birthdays, ask your friends and family to contribute to the future you by giving you cash you can put in your IRA or 401(k). You can also pick up a side hustle and funnel that extra money directly into your investment accounts. 

Open a Roth IRA and Maximize Savings

The federal government limits how much you can contribute to a 401(k) — for the 2020 tax year, the limit is $19,500 annually ($26,000 if you’re over 50) — but there are other avenues, like a Roth IRA. 

While you can’t deduct your contributions to a Roth IRA from your taxes like you can a 401(k) or traditional IRA, your distributions are tax-free. Plus, you can put up to $6,000 ($7,000 if you’re over 50) into your Roth IRA per year.

7. Protect Your Family With Life Insurance

There is no better time than now (or yesterday) to secure life insurance to help protect your family if the unthinkable should happen. Sure, insurance may not help you save money, but it will help ensure your family has the means to get by financially should you die unexpectedly.

The first question is how much life insurance you need. According to PolicyGenius, you should get 10-15 times your yearly income in life insurance. So if you earn $50,000 per year, you would want $500,000-$750,000 in insurance.

Keep in mind that as your retirement accounts grow, you can scale back on life insurance as your family would get access to this money in the event of your passing, thus replacing the need for so much insurance.

The next question is whether you need term or whole life. In most cases, term life is the better option, as it is more economical and provides the same death benefit. The only downside is you have to get a new term policy every five years or so, and the cost goes up each time.

Whole life also acts as an investment account since a portion of your premiums go into an account and gain interest. This “cash value” can be borrowed against or partially withdrawn at policy cancelation. This makes it a great option for those who have maxed out their Roth IRA and other retirement savings vehicles.

Always remember to have a conversation with your spouse or significant other and other trusted family members when purchasing a life insurance policy. This way, they know where the policy is held, the death benefit, and the beneficiaries. This will avoid the policy becoming lost and the death benefit forgotten should you die. 

Sustaining These Goals for Your Financial Future

woman at summit of mountain

With these financial strategies firmly in place, you’ll be well on your way to accomplishing your short-term and long-term financial goals. The key now is sustainability.

Each quarter, revisit your short-term goals, and once a year, be sure to check on those long-term goals. Compare where you are now to where you were at your last checkpoint. Celebrate the accomplishments, and don’t fret over any small failures. Instead, learn from your mistakes, pick up the pieces, and move forward again. It’s a tried-and-true path to building and sustaining financial success.

Save money, manage your cards and pay down debt faster!

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