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 savings grow by ensuring you have a solid foundation for your future plans. While having a healthy savings account is ideal, factors like building credit, investing, and building retirement savings are also important to personal finances.

What is a financial goal?

A financial goal is an objective or plan that involves developing financial literacy and managing your money. In most cases, financial goals involve saving money for a purchase of some kind, but a constructive goal can also involve building credit, investing, or even making more money.

Why are personal finances important?

Tracking and managing your money is an integral part of your future success. The benefits of financial management include mitigating that stress and the ability to:

  • Pay the debt: the the average American household that has debt owes around $145,000 from sources such as credit card debt, car loans, student loans, and mortgages. Even the youngest generation, ages 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 saved is essential to a good quality of life as we age.
  • Stay within your budget: Spending beyond your means can lead to large accumulations of debt, causing stress and anxiety. By budgeting and setting goals, you can comfortably stay within your means.
  • Have emergency funds: Having an emergency fund is essential to prepare for unexpected surprises. With an emergency savings fundYou can be prepared for medical bills, home or car repairs, and other unexpected expenses.

Establishing yourself on a secure financial foundation 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 met in a year. Examples of short-term goals include vacations, small home improvements, and electronic devices like televisions and laptops.

Medium-term financial goals

Achieving something in the next five years is a medium-term financial goal. Setting goals like this might take more planning and preparation. Examples of medium-term financial goals include improving credit scores, saving for a car payment, installing a 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 several years include buying a home, saving for retirement, or opening a college savings account for your kids.

5 Examples of Personal Finance Goals

While we are all different and have different desires, these sample financial goals are common goals that many people have to improve their personal financial health.

1. Start budgeting

The essential purpose of a budget is to make sure you live within your means, and it’s helpful when setting aside money for future expenses.

Many people think of budgeting as something that involves hard 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 tighter 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 can total around $7,095. Estimate your own expenses for a few months to create a budget for food purchases, entertainment and extras to stay within your means.

2. Build your savings

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

How much you save will depend on your goal and time frame: someone saving for a house will need to save more money over a longer period of time than someone saving for a car. If you’re simply saving for a summer vacation, you can start in the fall and save through the summer months when you book your trip.

No matter what your savings goals are, it’s important to have a clear plan and be disciplined. The most common savings strategy is open a separate account and transfer money there. A budget goal can work in tandem with increasing your savings, as staying on or under budget can give you more money to save.

3. Improve your credit

Building credit can affect future financial goals, like buying a car or a house. People with a good credit score demonstrate good payment history, debt, and credit history, so lenders are more likely to offer favorable loan terms and credit applications.

Steps you can take to help build credit include:

  • Pay bills on time

  • Pay debts

  • Keep your credit card balance low

  • Avoid opening too many lines of credit

  • Check your reports regularly

4. Save for retirement

Have a healthy retirement plan It starts long before you retire. There are a few options when it comes to retirement savings.

Many employers offer a 401(k) plan. Some even offer matching options, meaning they’ll match a percentage of their employees’ contributions throughout the year. Individual Retirement Accounts (IRAs) and Roth IRA 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 debt and loans is an important financial goal because it can affect your ability to get a mortgage or make it harder to buy a car. Paying off your loans can also improve your quality of life, since 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 amounts to $36,510 per borrower, and even 20 years after graduation, nearly half still owe more than $20,000. It’s important to do your research before taking out student loans or loans of any nature to make sure you’ll 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 At Mid Penn Bank, you can work toward personal financial health. Because Mid Penn Bank is a community bankWe are committed to the people 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 | NON BANK GUARANTEED | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE

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