5 Smart Financial Goals and the Best Ways To Achieve Them

Money is the one thing that’s different for everyone. If you are single or young, you might not have a lot of money, but you also might not have a lot of expenses. Even if you are in the middle of your career or nearing retirement, you might struggle to provide for yourself and your family on a day-to-day basis.

When it comes to managing your money, you need to set strong goals. GOBankingRates spoke with some experts on the goals all of us should have and the best ways to achieve them.

Financial Independence Over Homeownership

Not too long ago, owning a home was a dream that people worked their whole lives to achieve. Those days are in the rear-view mirror for many people, but a lot of working-class families haven’t re-evaluated their goals.

“I think the biggest financial mistake that many people tend to make is placing an overly high priority [on] owning a home,” said Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at Heider College of Business at Creighton University. “They fall prey to the myth that buying a home is a prudent investment and believe that they should do anything they can to buy a home.

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“By over-investing in real estate, many, many people crowd out other investment opportunities — like investing in stocks and bonds and in particular not allowing them to fund their 401(k)s and earn the full company match.”

Johnson believes there are still traditional ways that many people can achieve financial independence without purchasing a home or real estate.

“Perhaps the worst financial mistake anyone can make is turning down free money,” he said. “If one doesn’t contribute enough in a 401(k) plan that has a company match to earn that match, one is basically turning down free money. Contributing the max to your 401(k) also reduces your tax bill. Investors should do whatever it takes to … get your full employer match.”

Don’t Just Save — Invest

“Counterintuitively, the biggest mistake many people make in investing is not taking enough risk,” Johnson said. “Individuals need to be taught to invest and not to save for retirement. Unfortunately, many people are overly conservative with their asset allocation, particularly in their retirement accounts.

“You will sleep well if you commit funds to low-risk investments like money market funds or Treasury bills, but your investments will not grow substantially and may even have trouble keeping pace with inflation. You will eat well by consistently investing in stocks.

“Now, taking more risk doesn’t mean ‘swinging for the fences,'” he cautioned. “There are prudent ways to take risks and [there are] stupid ways. A popular cryptocurrency commercial says, ‘Fortune favors the brave.’ While that may be true, fortune doesn’t favor the stupid. Taking risk in unproven assets, like cryptocurrencies or meme stocks, is popular with many. Investing in speculative assets is not prudent risk-taking.”

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Save Smarter

As children, many of us were taught that money we received as allowances or gifts should be put in piggy banks, only to be used for big purchases or for “rainy days.” As adults, hardly any save their money in one place for a long time and not have it work for them.

Mina Tadrus, CEO of Tadrus Capital, has a few thoughts when it comes to the best ways to reach your money goals.

“Opening up a high-yield savings account is the simplest way Americans can earn more on their money,” Tadrus said. “These accounts typically offer higher interest rates than traditional bank accounts, with little to no minimum balance requirements or monthly fees. This helps you earn more on your money while keeping it safe and secure.

“Automating your savings makes it easier to set aside a portion of each paycheck towards savings goals,” Tadrus said. “This can help prevent impulse spending, ensuring that your future plans stay on track. You may even set up automated investments alongside automated savings if you want to benefit from compound interest over time as well.”

Generate Multiple Incomes

These days, the gig economy rivals the 9-5. Even if you do punch in at a “normal job,” you probably have a side hustle as well. All of this is good news for you because you are diversifying your income with multiple streams so you aren’t left high and dry if one peters out.

“It can be risky to rely on a single source of income, especially in uncertain economic times,” said Michael Hammelburger, a business development specialist. “I would advise that you create a more stable financial situation and reduce your reliance on any one source of income by diversifying your income streams.”

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One way that Hammelburger suggests doing this is by figuring out a passive income that you can generate with minimal work or oversight on your end.

“Passive income is money that you earn without actively working for it,” Hammelburger said. “Examples include dividend-paying stocks, rental property and business investments. Passive income streams can provide a source of income untethered to your time or effort, allowing you greater freedom and flexibility.”

Don’t Spend the Bonus or Raise

Getting a bump in salary is always welcome. So is an annual bonus or big commission check. But before you go out and spend it all in one place, consider using that money to make more money.

“The most common mistake people make is letting their spending increase commensurate with their new salary,” Johnson said. “What happens is they are unable to improve their financial condition because they spend everything they make. People are wise to effectively invest any money from a raise … as if you didn’t receive the raise. That is, continue to live the same lifestyle you led before receiving a raise and invest the difference.”

Johnson points to Warren Buffett’s words of wisdom: “Do not save what is left after spending; instead spend what is left after saving.” 

Johnson added, “Living below your means early in life allows you to live a more prosperous retirement.”

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