Mid Penn Bancorp: 5 Goals for Personal Finance and Planning

5 goals for personal finance and planning

Posted on March 28, 2022

Financial goals help grow savings by ensuring you have a sound foundation for your future endeavours. While having a healthy savings account is ideal, factors such as building credit, investing, and building retirement savings are also important for personal finances.

What is a financial goal?

A financial goal is a goal or plan that involves acquiring financial knowledge and managing your money. Most often, financial goals involve saving money for some purchase, but a constructive goal can also involve building credit, investing, or even earning more money.

Why is personal finance important?

Tracking and managing your money is integral to your future success. The benefits of financial management include alleviating this stress and the ability to:

  • Repay the debt: The average indebted American household owes about $145,000 from sources such as credit card debt, car loans, student loans and mortgages. Even the youngest generation, aged 18 to 23, already has an average debt of $16,043.
  • Build retirement savings: When you’re young, it’s easy to put off saving for retirement, but having money set aside is essential for a good quality of life as you age.
  • Stick to your budget: Spending beyond your means can lead to a large accumulation of debt, causing stress and anxiety. If you set a budget and goals, you can stay comfortably within your means.
  • Have emergency funds: Having an emergency fund is essential to prepare for unexpected surprises. With an emergency savings fund, you can be prepared for medical bills, home or vehicle repairs, and other unexpected expenses.

Establishing yourself on a secure financial footing will allow you to achieve your personal goals and build a healthy and enjoyable life.

Types of financial goals

Examples of smart financial goals will depend on your situation. You might want to save a few hundred dollars for a new tablet or laptop, or a few thousand to buy a used car. In general, there are three types of financial goals:

Short term financial goals

Short-term financial goals can be achieved within a year. Examples of short-term goals include vacations, small home renovations, and electronics like televisions and laptops.

Medium-term financial objectives

Achieving something in the next five years is a medium-term financial goal. Setting goals like this can involve more planning and preparation. Examples of medium-term financial goals include improving credit scores, saving for a car payment, installing a swimming pool, or paying off a credit card.

Long-term financial goals

A long-term financial goal would take more than five years to achieve. Examples of goals you’ll work on over multiple years include buying a house, saving for retirement, or opening a college savings account for your kids.

5 Examples of Personal Finance Goals

Although everyone is different and has different desires, these examples of financial goals are common goals for many people to improve their personal financial health.

1. Start budgeting

The main purpose of a budget is to ensure that you live within your means, and it is useful to set aside money for future expenses.

Many people think that budgeting involves strict calculations and spreadsheets, but most families take a more general approach. Subtracting your average expenses from your income can be a good start, but a stricter budget plan might involve setting aside specific amounts of money for certain expenses.

Monthly expenses, including bills, housing and food, for an average family of four could total around $7,095. Calculate your own expenses over a few months to create a budget for food shopping, entertainment, and extras to stay within your means.

2. Grow your savings

Another goal you could set for yourself is to put some money aside in a savings account. Savings allow you to prepare for expected and unexpected expenses. Your income will determine how much you can save.

The amount you save will depend on your goal and your time frame – someone saving for a house will need to put away more money for a longer period of time than someone saving for a car. If you’re just saving for a summer vacation, you can start in the fall and save through the summer months when you book your trip.

Whatever your savings goals, it’s important to have a clear plan and stay disciplined. The most common savings strategy is to open a separate account and transfer money into it. A budgeting goal can go hand-in-hand with growing your savings, because meeting or going over budget can give you more money to save.

3. Improve your credit

Construction credit can impact future financial goals, such as buying a car or a house. People with good credit demonstrate a good history of payments, debt, and credit history, so lenders will be more likely to offer favorable loan terms and credit applications.

Steps you can take to help build your credit include:

  • Pay bills on time

  • Pay off debts

  • Keep your credit card balance low

  • Avoid opening too many lines of credit

  • Check your reports regularly

4. Save for retirement

Having a healthy retirement plan starts long before you retire. There are several options when it comes to retirement savings.

Many employers offer a 401(k) plan. Some even offer matching options, meaning they will match a percentage of their employees’ contributions throughout the year. Individual Retirement Accounts (IRAs) and Roth IRAs are other retirement savings accounts that can be good options for people. Some also invest their money in stocks as a backup retirement savings account.

5. Pay off debts or loans

Paying off debts and loans is an important financial goal because it can affect your ability to get a mortgage or make buying a car more difficult. Paying off your loans can also improve your quality of life because you’ll have less stress and more disposable income to do the things you want to do, like vacations and home improvement projects.

Student loans are often a major source of debt. The average federal student loan debt currently stands at $36,510 per borrower, and even 20 years after graduation, nearly half still owe more than $20,000. It is important to do research before taking out student loans or loans of any kind to ensure that you will be able to repay them in the future.

Improve your personal financial health with Mid Penn Bank

Responsible financial management includes saving, budgeting, investing, and planning for unexpected expenses. With the professional financial services of Mid Penn Bank, you can work on your personal financial health. Because Mid Penn Bank is a community bank, we are invested in the individuals who make up our community.

Disclosures

The material on this site was created for educational purposes. It is not intended to be, and should not be treated as, legal, tax, investment, accounting or other professional advice.

Securities and insurance products:

NOT A DEPOSIT | NOT FDIC INSURED | NO BANK GUARANTEE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE

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