The importance of setting your long-term financial goals


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Long-term financial goals are a daunting subject. A long-term financial goal is typically something that’s at least seven years ahead of you, which can feel like forever away. But setting long-term financial goals can allow you to be steadfast in your commitment to your finances in general. When you consistently work toward setting yourself up for a more comfortable future, you’ll be more proud of yourself in the present. As the saying goes, people don’t plan to fail—they fail to plan.


First, it’s important not to beat yourself up for not being financially sound enough or feeling like you’re behind your peers. It’s reasonably difficult for many of us to imagine the distant future when we’re busy covering day-to-day, month-to-month expenses.


According to a recent poll, 40% of Americans reported that they would struggle to cover a $400 unexpected expense. According to data from the Population Reference Bureau, approximately 24% of men and 16% of women ages 65 and older were currently active in the workforce. These numbers are supposed to increase to 26% for men and 18% for women by 2026.


Related: Credit card refinancing vs consolidation

Starting by thinking big

Although those statistics are harrowing, they help make a good case for setting seemingly difficult long-term financial goals sooner than later. Psychological research by Edwin Locke and Gary Latham showed that subjects who were assigned specific, challenging goals were 90% more likely to succeed. The two researchers went on to publish “A Theory of Goal Setting and Task Performance,” in which they discussed what they’d determined as the five key components of setting achievable goals:

  • Clarity
  • Challenge
  • Commitment
  • Complexity
  • Feedback

What do these mean for your financial goal setting? Let’s break it down. First, you must have clarity and specificity about exactly what you want to accomplish. It can be helpful to start by making two lists—what’s most financially stressful to you right now, and what you might consider a dream that better finances could aid in making real.


While traditional long-term financial goals like saving for retirement or buying a home are worthwhile, they’re so universal that they might seem uninspiring.


Keep in mind that you can and will likely end up working toward those goals and some goals that feel personal. Dream big—what kind of goals might you find meaningful to work toward? Some long-term financial goals we’ve encountered when speaking with SoFi members might spark an idea of your own:

  • “Start my own bakery business and become my own boss.”
  • “Travel throughout every continent, writing about it as I go.”
  • “Buy a property in the desert and build my own personally-designed home to rent as a boutique AirBnB.”
  • “Start a scholarship fund for low-income high school students to enroll in STEM college programs”
  • “Pay for my parents’ housing and health care costs for the rest of their lives so they don’t have to worry.”
  • “Release an e-commerce capsule collection of clothing I’ve designed.”

You probably have general ideas of what your long-term financial goals may be, but getting as specific as possible is what can help you the most. You could take time to do some structured self-reflection to be clear about exactly what makes your goals matter to you in the biggest way possible—write them down and ask yourself questions about them.


What about your goals is motivating for you? Can you break your big goals down into smaller benchmarks that also motivate you? Do they feel challenging enough to be aspirational and inspiring? You might find it helpful to try not to think of your long-term financial goals as dreams.


Consider them possible realities, ones that you’ll be living in once you start working towards the achievements you’ve identified.

Breaking them down

Next comes the harder part—making your commitment to your goals real and tangible. This is where the “complexity” component becomes important. How might you simplify the path you’ll take towards your future?


At this stage, you can take a look at the goals you’ve laid out and prioritize them. Which goals will have the biggest positive impact on your life? Is there a goal that feels like it aligns nicely with the achievement of another?


Next, you can break down the goal into smaller, shorter-term goals. Any big to-do will likely seem overwhelming without a tangible, step-by-step plan towards reaching the end point. The processes of prioritizing and breaking down your various long-term goals all at once can help you be realistic and excited about the processes of achievement. You might find it helpful to place dollar amounts on these components.


Let’s go over how we might break it down. For example, we can consider the goals “save for retirement” and “start my own bakery business” alongside one another. First, you might find it helpful to focus on any outstanding shorter-term debts—if you’re in credit card debt, consider making it a priority to get out from under it.


If you don’t have an emergency fund that covers at least three months of your expenses, you could commit to contributing towards it until it’s full. How much will you need to put away every month? Next, you could research retirement savings options.


You might go through your employer or pursue a separate account on your own. What’s your goal amount of money for this fund? Break down what you’ll need to contribute to get there, month-by-month and year-by-year.


Conversely, you could approach the goal of starting your own business by laying out the steps you’d need to take to get there. For any personal long-term financial goals, it’s possible your initial steps can be delightful or even cost-free:


Research: what do you need to learn? Can you do online research and consult your local library?

Find a mentor: Any expert will tell you that they became a master by following in another’s footsteps. This can be as easy as finding someone who’s currently a small business owner and asking them out to coffee, or as huge as approaching your hero for advice via email.


Whatever the first steps are, or whatever the subsequent steps you need to take to move forward after getting started, the important thing is understanding how to develop your own repeatable goal-setting process. Everyone is different, so find what works best for you.

Being your own accountability expert

Finally, think about feedback. How will you hold yourself accountable for working toward the benchmarks you’ve identified? Once you’ve identified your goals, prioritized them, broken them down, and put dollar amounts on the pieces that require them, you might find it helpful to find an accountability buddy.


You could tell someone you trust about your goals and ask them to check in with you on a weekly or monthly basis. Schedule those calls or meetings ahead of time and put them in your calendar to make sure they don’t get lost in the ether.


If you have a partner, be sure to discuss your goals with them. They can help you achieve them and support you in ways you might find invaluable as you move forward.


Ultimately, it’s possible that creating your own reward system and deciding what you’ll do when you fall short could be one of the most crucial ways to ensure your success. As far as rewards go, this could mean setting aside as little as $40 per month as pure fun money to use after you’ve hit your benchmarks, or it could be saving up for a vacation.


When it comes to self-imposed consequences, it can be helpful to remember that you’ve set these goals to develop better habits and experience more happiness in the long run.  Punishing internal monologue likely won’t do you any good. You can benefit from reframing negative thoughts like “I’m never going to get there” or “I’m a failure” with less catastrophic ones, like “trial and error is crucial to getting anywhere.”


It’s important to set out a prospective system for checking in with yourself, like a weekly log of hits and misses, that allows you to be realistic so you don’t end up hurt by your own blind spots, and you can chart improvement as you go.

Setting yourself up for success

No matter what your long-term financial goals are, it’s the planning that helps make them possible. Creating plans to achieve your long-term goals can help give your life structure and a deeper sense of purpose in all of your actions.


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7 debt consolidation myths you shouldn’t believe


In the right circumstances, debt consolidation can help get debt under control. But there are entities that offer the promise of debt consolidation yet don’t deliver — and even charge illegal fees in the process. Understand the following debt consolidation myths, and the pros and cons of the process, before pursuing it.




There are many types of debt consolidation. A debt consolidation loan, for instance, is a personal loan that can be used to pay off multiple kinds of high-interest debt, such as credit cards and payday loans.

But it can’t be used to pay off federal student loans. There’s a separate process for that, called federal student loan consolidation. This option won’t reduce your interest rate, but it can give you more time to pay off your loans or qualify you for additional reduced-payment programs.

You can also consolidate credit card debt on its own using a balance transfer credit card, which moves high-interest debt across multiple cards to a single one. You’ll have as long as 21 months, depending on the card for which you qualify, to pay off the debt interest-free.




Like other types of financial products, the higher your credit score, the more favorable terms you’ll get on debt consolidation loans and balance transfer credit cards.

But you can qualify for a debt consolidation loan with good, fair or even poor credit. Visit your local bank or credit union to check the options available there first. You may qualify for a lower interest rate if you have a long-standing relationship with the institution.




If you qualify, you could get a balance transfer credit card with no transfer fees and no interest charges during the introductory period. Paying off your debt during that time means consolidating your debt fee-free.

But some cards do come with a balance transfer fee; consolidation loans may also have origination fees. Take these into account when considering whether to consolidate your debt or choose a different option, such as negotiating with your creditors yourself to lower interest rates.

Use caution if you interact with a company that charges to consolidate debt for you. Some companies charge fees to consolidate student loans, for instance, which is free to do directly through the government at The Federal Trade Commission (FTC) maintains a list of companies that it has banned from offering debt relief services.

It is illegal to charge a fee by phone before issuing a loan, according to the FTC. Familiarize yourself with the signs of an advance-fee loan scam.




On the other hand, there are legitimate types of debt relief that may cost money.

Though not specifically a type of debt consolidation, debt management plans require working with a nonprofit credit counseling agency to simplify payments and potentially pay less on interest. You’ll make one payment to the credit counseling agency each month, which will then pay your creditors on your behalf. You’ll be charged a monthly fee and potentially an enrollment fee.

But you may find these fees are worthwhile to address your debt with the help of a reputable professional. A debt management plan requires making payments regularly and on time for the full length of the plan, which could take up to five years.




Opening new accounts, such as a credit card or loan, may lead to a small drop in your credit score. An inquiry for a new credit card generally takes fewer than five points off a FICO Score, according to FICO. But opening multiple new accounts over a period will more dramatically affect your score.

Research your options in advance so that you apply for a balance transfer card or debt consolidation loan for which you’re likely to qualify. Once you get it, make payments on time, every time. Payment history accounts for the largest share of your credit score — 35%, according to FICO.




You may not have to apply for a new credit card or loan to get out from under your debt. Alternatives to debt consolidation include working directly with your creditors, who may be willing to lower your interest rate, waive late fees or give you a new monthly payment. You could also choose a debt management plan, which doesn’t require you to open a new line of credit.

If you can pay extra toward the debt, you can opt to pay off the smallest loan balance first, then put the equivalent of that monthly payment toward the next-smallest balance. This is the debt snowball method, and can help you gather wins on your way to debt freedom. Or you can pay the highest-interest loan first, called debt avalanche, which will save more money in the long run.




While debt consolidation can help you feel less overwhelmed in the short term, ending a reliance on credit cards — and preventing future debt — is a separate, and necessary, process.

Once you’ve chosen a debt consolidation method, audit your expenses and make a spending plan. Cancel subscriptions you no longer use and identify areas that need a closer look, such as how much you spend on meals out. You don’t need a complete overhaul of your budget, but a few key changes — such as cutting back on food delivery or reducing subscription services — can help you avoid creating more debt.




Debt consolidation is a smart move when you qualify for a balance transfer credit card or loan that will lead to interest savings, as well as when you make payments on time for the duration.

Pause making purchases on the accounts you’re paying down. If you get a balance transfer credit card, make sure you fully pay off the debt during the card’s interest-free period. Divide your total debt by the number of months with the 0% interest rate and commit to sending that amount to the card each month.




While debt consolidation myths abound, researching your options and relying on reputable sources of professional guidance will help you land on a strong strategy. Deciding to pay off debt is half the battle. The next step is to choose a debt consolidation method that will give you the best chance of success.


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