In personal finance, what is the primary purpose of setting financial goals?

Setting financial goals plays a vital role in personal finance as it provides direction and a sense of purpose for how individuals manage their saving and spending. Financial goals help define what a person wants to achieve with their money—such as buying a home, saving for retirement, or funding a child's education. This clarity enables individuals to make informed decisions about where to allocate their resources, ensuring that their financial behaviors align with their long-term aspirations.

When individuals have clear goals, they can prioritize their expenditures and savings strategies accordingly. This structured approach not only motivates them to stay disciplined but also helps in measuring progress over time. As goals evolve, they can adjust their financial plans to remain on track toward achieving those objectives, enhancing their overall financial well-being.