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Financial goals

How to set financial goals? 5 examples and steps of the financial journey

Building wealth can be challenging, especially with little left after monthly bills. However, the good news is that anyone, with the right planning and a bit of patience, can achieve their financial goals and begin building wealth consistently. The key lies in setting clear and realistic goals, which will serve as a guide for all your financial decisions.

This article will explain why financial goals are so important and provide practical examples to help you take the first steps towards stability and financial independence.

Why are financial goals important?

Think of your financial goals as stepping stones. Each goal you achieve takes you one step closer to building wealth.

Without goals, it’s easy to lose sight of what you’re aiming for, and even small financial setbacks can feel overwhelming. However, with clear objectives, you remain focused and avoid unnecessary spending.

To understand how these goals can transform your financial life, it’s essential to know the four areas that define a successful financial journey:

  • Stability: Ensuring your income is sufficient to comfortably meet your monthly expenses, ensuring your day-to-day financial needs are consistently covered.
  • Security: Having enough extra in case of emergencies, such as medical bills or sudden job losses.
  • Independence: It means reaching a point where your passive income covers your living expenses, freeing you from the need to depend on your primary job.
  • Freedom: Achieving the flexibility to make life choices, whether that’s retiring early, pursuing a passion project, or living in a location of your choosing, without being constrained by financial limitations.

Imagine building your wealth as a chair, with each of these areas representing one of its legs. Without one of the legs, your chair might still stand up, but you wouldn’t be confident sitting down, right? The same goes for your wealth: if any of these areas are lagging, you’re likely in trouble.

5 examples of how to set financial goals

Now that you understand the importance of setting financial goals and the areas you can achieve them, here are five simple, yet effective, ways to set financial goals – with practical examples for each!

1. Track your income and monthly expenses

In the short term, creating a budget is the first step to achieving financial stability. Think of a budget as a tool that helps you understand exactly where all your money is going and how much is coming in.

Start by listing all your essential expenses – such as rent, utility bills, groceries – and subtract this amount from your total monthly income.

Regularly monitoring this helps prevent overspending and provides a clear understanding of how to allocate your money more effectively.

Example: You receive $2000 a month and use $1300 for basic expenses. Now you know that $700 is available for additional spending. Knowing this exact amount allows you to plan how much to save each month and helps prevent unnecessary or unimportant purchases.

2. Create an emergency fund

According to a report by Bankrate , only 41% of Americans say they could cover an unexpected $1,000 expense.

For this reason, having an emergency fund is crucial for financial security. It provides peace of mind, knowing that you have money set aside for unforeseen events, such as medical expenses. A common rule of thumb is to save 3 to 6 months' worth of living expenses.

Example: Using the same $1300 in basic living expenses from the previous example, it's important to have a reserve that can cover those costs for several months. Based on that amount, an ideal emergency fund would range between $3,900 and $7,800. This would allow you to meet your financial obligations if you were to lose your job during those months, for instance.

3. Pay off your debts

If you have debts, especially high-interest debts like credit cards, paying them off should be one of your top financial goals. According to a recent report from Money , the average household credit card debt in the UK increased by over 6.5% compared to the same period in 2022, reaching £2,376 per household, or £1,248 per adult.

The faster you eliminate debt, the faster you will move towards financial independence. This will help you move beyond mid-term goals and start taking action on longer-term goals.

Example: If you have active credit card debt and are currently paying $100 each month, but are considering using part of your monthly budget to invest, this could be a trap: credit card interest rates are usually higher than any potential return on investment. Therefore, it’s more beneficial to pay down and eliminate your debt as quickly as possible before investing your money.

AVG interest rates for different types of Debt and Investments

4. Invest for long-term growth

Investing is a powerful tool for building wealth and getting you closer to your dreams. Whether through government bonds, the stock market, or cryptocurrencies, the key is to start early and be consistent.


Due to the magic of compound interest — where you earn interest on both your initial investment and the interest it generates — starting early is key. For this reason, set a goal to begin investing, even if it’s with a small amount.


Example: As shown in the illustration below, if you invest $5,000 every year (equivalent to $416 per month) with an annual return of 11%, the results would be as follows:

  • After 10 years of investing: $83,227 return
  • After 20 years of investing: $168,887 return
  • After 30 years of investing: $364,615 return
  • After 40 years of investing: $787,176 return

Notice that the investor who invested for 40 years earned double the return of the investor who invested for 30 years. This is the power of exponential growth. The difference would be even greater if they had started earlier or continued investing for a longer period. So, regardless of the amount you can start with, the best day to start investing is today, and the second-best day was yesterday.

For reference, the average rate of return for the S&P 500 between 2013 and 2023 is 13.37% per year , while the US base interest rate is currently 5% .

5. Plan for retirement

Just like other long-term investments, planning for retirement requires early and consistent effort. Even if retirement feels distant, regularly contributing to a pension or retirement account will set you on the path to financial independence, helping you approach this stage of life with confidence and peace of mind.

The report "Have We Saved Enough?" published by the Centre for Ageing Better, highlights that one in four UK residents (approximately 3 million people) aged 50 to state pension age are at risk of not reaching the Joseph Rowntree Foundation's minimum income standard for retirement, which is £28,000 a year.

Example: Contribute $150 per month to your retirement fund. Every two years, increase this amount by 10% to ensure you are maximising growth and adjusting your contributions as your income increases. With this strategy, you could accumulate around $300,000 by the age of 65.

How crypto can play a role in your financial goals

In addition to traditional investments, cryptocurrency offers an important opportunity to build wealth. 

Cryptocurrencies can enhance your financial journey in a variety of ways, such as providing an additional income stream, acting as a hedge against inflation, or diversifying your investment portfolio. 

If you’re curious about how cryptocurrency can support your path to financial independence, explore the benefits of investing with SwissBorg, where we simplify the process for beginners and advanced users alike.

Discover more about how SwissBorg can help you on your journey towards your financial goals.

Conclusion

Now that you’ve learned about the different stages of the financial journey and how to set clear financial goals, it’s time to take action. Setting financial goals is the foundation for achieving financial freedom, whether you’re just starting or refining your strategy. 

The key is to think big, start small, and remain consistent. By tracking your progress and adjusting as your situation evolves, you’ll be taking steady steps towards building wealth and gaining confidence in managing your finances.

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