How a Loan Can Help You Reach Your Financial Goals
Everyone has goals, but not everyone has a plan for reaching those goals. Chances are that you have financial goals as well. If you aren't sure how to reach your financial goals, don't worry. You aren't alone.
If you have financial goals that you are working towards, then you may consider getting a personal loan. You may ask how a loan can help you reach your financial goals. First I will explain how to set financial goals, including how to organize your finances and how to go about financial planning. Once you have set your financial goals, you will be ready to learn how a loan can help you reach your financial goals.
How to Set Financial Goals
Before you can reach your personal financial goals, you need to know what those financial goals are! This means taking stock of your wants and needs. If you are not quite sure how to set financial goals, that's okay. That's why I am here: to help! But don't underestimate the importance of setting financial goals.
First, let's talk about financial goals, and then we will be able to dive into organizing your finances and financial planning.
Financial Goals
Many goals you have may actually be financial goals, and you may not yet realize it. Here are some common financial goals:
- saving up for a specific event, such as:
- your dream wedding
- moving to a new house
- building your dream home
- going on a vacation
- paying off debt, such as credit card debt or student loan debt
- opening your own business
- creating an emergency fund
- saving money for retirement
- just feeling financially secure
Now it's your turn. Make a list of all of your own financial goals. These can be long-term (such as saving up for retirement) or short-term (such as saving up for an event) financial goals. You can use our list above for reference, as some of your own financial goals are probably in this list, but make sure to add your own financial goals as well.
An important thing to keep in mind when setting any kind of goal is to set realistic goals. One popular method to set realistic goals is to use the SMART goals method. SMART goals must be:
Specific: Be specific when setting financial goals. It is not enough to just say, "I want to save up for a nice family vacation." You need to see how much a nice family vacation will cost (flights or gas, hotel expenses, money for souvenirs, food, etc.). Then, once you have added all of these costs up, then you can say, for instance, "I want to save up $2,500 to spend on a nice family vacation."
Measurable: When setting financial goals, make sure they are measurable, so that you will know when you have reached certain benchmarks in your goal and when you have finally reached your goal. This way, you can track your progress.
Attainable: Don't make a goal that is too far out there and simply isn't attainable. Goals can be challenging but should always be possible. For example, if you have $40,000 in student loans, then a goal in which you pay off all of your student loan debt within a year after graduation is simply not attainable. Instead, you can make a goal to pay a certain, specific amount each month until you pay them off in 5-10 years. If you don't make your goal attainable, then you will quickly become discouraged and may not even be able to make progress toward your goal due to loss of hope.
Realistic: Make sure that your financial goals are realistic. This means taking stock of your areas of weakness. Everyone has their own challenges, but you need to be aware of these while making goals. For instance, in keeping with the previous example, is it realistic in your personal situation that you can put $2,000 a month towards paying off your student loans? Probably not, especially not if you just graduated and are starting in an entry-level job. Maybe strive for $200-$400 a month, depending on your specific financial situation. (Don't forget to consider student loan forgiveness programs, if you may be eligible.)
Time-bound: Make sure you have a deadline, a set date, at which time you should have met your goal. If you do not make your goal time-bound, then it is easy to keep pushing it back further and further, until you just never reach your goal. By making your goal time-bound, you also make it easier to set benchmarks within your goal timeline. It will feel good to reach these benchmarks, which will encourage you to keep going.
Organize Your Finances
Now that you have created your financial goals, it is time to organize your finances and begin goal based financial planning.
Organizing your finances begins with improving your overall organization, including both your files at home and on your computer. This is extremely important because financial planning requires organization of a lot of different numbers. It will save you a lot of time later if you organize all of this now.
An important step to organizing your finances is to create a budget. A great thing about creating a budget is the flexibility involved. There is no one perfect budget out there. You can build a budget on a low income, build a budget as a couple, and choose from a variety of types of budgets -- including the 50/20/30 budget and zero-based budget. The important thing is to choose a budget that works for you, and make sure to look through these effective budget management skills everyone should know. I highly recommend making a budget in Excel, since Excel can do all of the calculations for you. Plus, it just makes your budget visually more easy to understand and follow.
Now that you have a budget, you can work on following your budget and tracking spending. By tracking your spending, you can be more conscious about the financial choices you make. Are you really working toward your financial goals, or are you getting caught in your old spending habits? Are you spending how much you should in each area of your budget, including bills, food, etc? If your bills seem a bit high, see if there is a way to cut back or even negotiate your bills, in order to get better deals on things like Internet, cable, and your phone plan.
If you feel overwhelmed at any step in the process of organizing your finances, don't hesitate to take advantage of the many free finance apps and help online and to ask for help from a finance expert. You can also read up on finance yourself. Take a look at our list of 7 best personal finance books for beginners, or, if these personal finance books seem too basic for you, take a look at our list of 7 best personal finance books for experts. Having a basic understanding of finance may help you figure out any confusion you have on your own.
How a Loan Can Help You Reach Your Financial Goals
Now that you have set your financial goals and have organized your finances, I can explain to you how a loan can help you reach your financial goals.
You would be surprised, but for as many financial goals as there are, there are also almost just as many types of loans, which can be used to help you reach your financial goals. Here I will go through the main types of loans out there, as well as how a loan can help you reach your financial goals.
Credit Card Loan
You may not have thought of credit cards as loans before, but just like regular loans, credit cards help you pay for things when you may or may not have the cash upfront. Credit cards can be especially helpful in reaching your goals when you find a credit card that has low (or even 0%) interest and no limit or a high limit.
Depending on your interests, you may be interested in getting a rewards credit card, so that you can earn points or cash back. If you like traveling, then you may be interested in a travel credit card, which could earn you points towards things like airline miles, hotel stays, and more.
Auto Loan
If you have a car or need to buy a car, then you may benefit from an auto loan. You may need an auto loan if you want to buy a new car, buy a used car, need to buy a car with bad credit, need to refinance a car that you have already had financed -- if the interest rate has significantly changed or if you are just trying to lower your monthly payments, or decide to complete a lease buyout -- if you are interested in purchasing a car that you have been leasing. Like with most other types of loans, it is possible to get an auto loan with low income.
Business Loan
If you are interested in fulfilling your dream of owning your own business, then finances should not hold you back. If you need help opening your own business, then a business loan could help you make your dreams your reality.
There are many types of business loans to choose from. Business loans could come in the form of a startup loan, business financing, equipment financing, lease buyout auto loans -- if you require vehicles to maintain your business, a traditional term business loan or a short term business loan -- depending on if the loan is for traditional business expenses or rather for unexpected business expenses that you cannot afford at the time, an SBA (Small Business Administration) loan, merchant cash advances, or even for a business line of credit.
Mortgage Loan
Having a place to rest your head at the end of a long day of work is important. Even more important is making sure that whatever house you purchase feels like a home. By getting a mortgage loan, you can make sure that the house you purchase is the one that you really want, even if it is not currently in your budget.
If you are in this situation, then you may want one of the following mortgage loans: a home purchasing loan, mortgage refinancing loan, FHA (Federal Housing Administration) loans, VA loan -- for active-duty military personnel and veterans or their families, home equity loan, jumbo mortgage loan, cash-out refinancing, or reverse mortgage -- usually better for older homeowners.
Getting a mortgage loan is not the only way to make your dream home your reality. If you are interested in buying a home but do not yet have the best credit score, then you may want to consider a Rent-to-Own Home Agreement. With a Rent-to-Own Agreement, you can avoid the issues associated with getting a mortgage or personal loan with bad credit.
Student Loan
If you are trying to better your life by getting an education, then coming from a certain background should not hold you back. Not being able to afford college should not mean that you have no other option to skip out on getting a higher education.
If your goals could be reached by going to college and getting a degree but didn't get a grant to afford the increasingly high tuition, then a student loan could make your dreams come true. Make sure you understand all of the costs of studying, including tuition, school fees, room and board, books and supplies, and more.
A student loan could help you reach any level of higher education, whether you are working toward an associate's degree, an undergraduate degree, a master's degree, or even a doctor of philosophy (PhD) degree.
We already did the homework on the top 7 student loan lenders, so you don't have to. Before deciding on getting a student loan, though, make sure you understand the difference between federal student loans and private loans. Be careful to avoid common student loan scams during the process of looking for the right student loan for you and your situation.
If you already have student loans and student loan debt, it's not too late. You can always decide to refinance with a private student loan to save money.
Personal Loan: There are many different types of personal loans, more than I would be able to get into here. Here is a list of some of the types of personal loans:
Debt Consolidation Loans: Debt consolidation helps you handle your debt better. Consolidating your debt allows you to simplify your debts into one monthly payment, rather than multiple payments to different people at different interest rates. There are many different types of debt, as well as multiple ways to take care of debt (including the Debt Snow Ball Method), but debt consolidation is great because it is simple.
Medical Loans: Your health is irreplaceable. If you need help paying your medical bills, then a medical loan may help get you back on your feet. You can even get a medical loan for hearing or a medical loan for chiropractic treatments.
Moving Loans: If you need to relocate because of a job, marriage, or any other reason, then you may need a bit of financial assistance. A residency relocation loan could help with things like new location expenses and storage fees. Moving loans could also help with any kind of moving expenses you have, such as hiring a professional mover, renting a truck so that you can do the move on your own, for packing material, etc.
Legal Loans: If you need legal assistance, then a legal loan could help you afford an attorney. If you still cannot afford a lawyer, see if you can pay for a lawyer with no money.
Travel Loans: Get a travel loan for your next big vacation. Traveling allows you to have invaluable experiences, which will pay for themselves. Don't miss out on the chance to travel the world just because it is expensive. There are actually many ways to make your trip affordable.
Solar Panel Loan: If you want to save money on energy bills and help the environment but cannot afford the initial investment, then consider getting a solar panel loan.
As you can see, there are many different reasons to get a personal loan. A personal loan can even help your credit.
Getting a personal loan is so easy you can get a personal loan in 3 simple steps. Just be careful when shopping for a personal loan. Try to recognize and avoid personal loan scams.
No matter what your financial goals are, now you should have an idea of how a loan can help you reach your financial goals. Maybe getting a loan isn't the right decision for you, but it is important that you consider every option, so that you can truly decide which options fit you and your situation. You may be surprised to find out how a loan can help you reach your financial goals.