How to Set Financial Goals (and Achieve Them)

A financial goal is any money-related outcome you want to achieve within a specific time. Financial goals can vary widely based on how much money you make and your wants and needs.

You can set different types of money goals based on the time frame. The plan you use to achieve a short-term financial goal will differ from how you accomplish a long-term goal spanning twenty or thirty years.

• Short-term financial goals. What do you hope to accomplish in the next year? For example, do you want to grow an emergency fund, pay your credit card debt, or save for a vacation?
• Medium-term financial goals. You want to accomplish these goals within the next one to five years. For example, you might want to pay off your student loans or save for a down payment.
• Long-term financial goals. A long-term goal is anything beyond five years and could last several decades, like saving for your children’s education or retirement.

If you’re ready to tackle your short, medium, or long-term financial goals, here are the steps to get started.

1. List your financial goals

The first step in setting financial goals is understanding where you want to be in your financial future. Consider all aspects of your finances, including savings, debt, investments, and major purchases. As you work through each area of your finances, make your initial list of financial goals.

There’s no rule on where you make your list. You can use a digital note or document, a spreadsheet, or old-fashioned pen and paper. Some budgeting apps also have built-in goal-tracking features that link to your financial accounts. What’s most important is getting started and making your goals list.

6 personal finance goal examples

If you’re struggling to think of specific goals you want to set, here are six financial goal examples:

• Create an emergency fund. You can’t predict if or when you’ll experience job loss, a medical emergency, or even an unexpected home repair. An emergency fund provides a financial cushion when you need it.
• Save for a down payment. If you dream of home ownership, you might set a goal of saving for a down payment. Determine how much money you need for a down payment, then start putting it away.
• Pay off your credit cards. If you’ve maxed out your credit card and want to pay it off, make a plan to tackle your debt as soon as possible.
• Eliminate student loans. Tired of having student loan payments looming over your head? Set a goal to pay them off within the next few years.
• Save for retirement. While retirement might seem far away, there is no better time to start saving than right now.
• Plan a vacation. Maybe you’ve always wanted to take your family on a vacation. Price out your travel, food, and accommodations and decide how much you need to save to make your vacation dreams a reality.

2. Prioritize your goals

Next, it’s time to review your goals and rank them from most to least important.

For example, creating an emergency fund and paying off credit card debt may be at the top of your list, while saving for a future vacation is a lower priority.

There’s no right or wrong order. Your top priority isn’t going to be the same as your friend’s, relatives, or neighbors.

3. Apply the SMART framework

When setting goals, you can use the SMART framework to help you stay motivated and focused. SMART is an acronym for specific, measurable, achievable, relevant, and timely. Here is what each of those terms mean for your financial goals:

Specific. “Be better with money” is a vague financial goal. How do you want to be better with money? Do you wish to pay off your credit cards? How about saving money in an emergency fund? Or, perhaps you want to switch to a better bank account?

The options are endless, but you need to specify your financial goal to achieve it.

Measurable. Similarly, your money goal needs to be measurable. Otherwise, how do you know if you’ve succeeded or are making any progress?

Say you want to pay off your credit card debt. You could save $5,000 in an emergency fund or open a new checking account next month.

Achievable. When setting a financial goal, you want to make it reasonable to not set yourself up for failure. For instance, giving yourself three months to save up for a large down payment might not be realistic.

Aim to pick a goal you can achieve within your given time frame. Otherwise, you might get frustrated and give up.

Relevant. Maybe a million dollars in a retirement account isn’t relevant to you. Instead, why not pick something that will immediately better your situation?

For example, if you know you’ll need a new car in the next two years, starting to save up for one is a relevant goal. Or, if you’re still in debt, getting rid of your high-interest credit card debt would be most relevant.

Timely. You also want to set a goal you can achieve within a set period. You must accurately understand your financial situation to pick a goal you can realistically achieve in a specific number of days, months, or years.

4. Make a financial plan to reach your goals

Financial goals are only helpful if you follow through and work to achieve them as part of your financial plan.

With the SMART goal framework, you can chart a path for each of your goals. That could be small contributions to each goal or focusing on your top goal before moving on to the next. Remember to include these goals in your budget.

One of the most effective ways to reach financial goals is automation. For instance, you can split your direct deposit into multiple accounts or set up a recurring transfer from your checking account to your savings account.

5. Monitor your progress and revisit your goals

While automating your savings and debt payoffs means you don’t have to worry about transferring funds or tinkering with your money regularly, it’s not entirely set-it-and-forget-it.

And if you’re struggling to reach your goals, consider money-saving strategies like canceling subscriptions and shopping around for less expensive car insurance.

Checking in with your progress monthly or quarterly can help you stay motivated and allows you to tweak your automations as needed over time. And when you reach one of your goals, you can celebrate the victory.

When you set your financial goals and regularly assess your financial plan, you may accomplish things you hadn’t thought possible, like saving for a home or paying for college for your children.

If you’re finding it difficult to set aside as much money as you’d like each month, you’re not alone. Check out our money-saving hacks for tried and true methods to make every dollar go further.