How to Set Financial Goals

Setting financial goals—whether for the short, mid, or long term—is a crucial step toward securing your financial future. Without clear goals, it’s easy to spend more and save less than necessary, potentially leaving you unprepared for unexpected expenses or retirement.

Having defined goals helps you think ahead, plan effectively, and stay on track, not only for the outcomes you want but also for life’s surprises.

Short-Term Financial Goals

Short-term goals lay the groundwork for bigger objectives that take more time to achieve. Three common short-term financial goals are:

1. Creating a Budget
2. Building an Emergency Fund
3. Paying Off Credit Card Debt

Creating a Budget

Many people manage their finances “in their head,” believing they know what’s available and which bills need to be paid. However, without a written budget or app, it’s challenging to ensure your money is going where it matters most.

Start tracking your income and expenses—you might be surprised how much money slips through the cracks each month. A budget provides a clear picture of your financial situation and ensures you’re allocating funds toward your priorities.

Building an Emergency Fund

An emergency fund is your safety net for unexpected expenses. It reduces the need to take on debt or dip into investments during unforeseen events.

Keep this fund in a separate account to avoid the temptation of using it for non-emergencies. Begin with an amount you’re comfortable saving, then aim to build at least three months’ worth of living expenses—or more if your job isn’t stable.

Paying Off Credit Card Debt

If credit card debt is holding you back, face it head-on. Start by adding up all your debt—many people don’t realize how much they owe until they see the total. Once you have the number, create a plan to systematically pay it down. If you need help, consider tools like my Debt Terminator Program for guidance.

Mid-Term Financial Goals

Mid-term goals typically span three to ten years and act as a bridge between your short- and long-term goals. Once you’ve tackled your immediate priorities, you can focus on objectives like:

• Buying a home or car
• Expanding insurance coverage for your family
• Paying off student loans
• Saving for your child’s college education

For example, if purchasing a home is your goal, you’ll need to:

• Understand the homebuying process to avoid missed opportunities
• Research different types of mortgages and their components
• Account for costs beyond the mortgage, like maintenance and property taxes
• Calculate how much home you can afford without becoming house poor
• Save for a down payment, closing costs, and moving expenses

Long-Term Financial Goals

Retirement planning is the most common long-term financial goal. It’s also one of the most complex, as your savings may need to last 30 years or more.

While general guidelines suggest saving 10% to 15% of your income in an employer-sponsored plan or IRA, everyone’s needs are different. If you’re unsure about your retirement readiness, consult a financial professional as early as possible to create a plan tailored to your lifestyle and goals.

The Goal-Setting Process

Setting financial goals follows the same principles as any other type of goal-setting. Start by listing your goals in order of priority, then use the SMART-W framework:

• Specific: Be clear about what you want to achieve.
• Measurable: Define how you’ll track progress.
• Achievable: Set realistic expectations.
• Relevant: Align goals with your overall financial priorities.
• Time-Based: Create a deadline for achieving the goal.
• Why: Understand the purpose behind the goal to stay motivated.

For instance, if retirement is your goal, decide when you want to retire, the lifestyle you envision, and how much money you’ll need to support it. Then, create a measurable plan that’s achievable within your desired timeline.

The Bottom Line

Setting and achieving financial goals requires both strategy and flexibility, as life is always changing. Whether you’re working with a financial advisor or managing on your own, make it a habit to review your goals annually, adjust them as needed, and track your progress.

And don’t forget to celebrate your wins—no matter how small!