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The Complete Guide to Setting Financial Goals and How to Achieve Them

Last updated 03/21/2024 by

Jennifer Leonhardi
When it comes to planning for our financial future, many Americans are content to live carefree in the knowledge that worrying about tomorrow will only ruin a perfectly good today.
But there are some of us who have accepted the reality that to secure a stable financial future, we need to start planning for it today.
You’ve got to be very careful if you don’t know where you’re going, because you might not get there.Yogi Berra

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What is the key to financial success?

“What is the key to financial success?” There is quite possibly no greater question ever asked. After all, if we had the answer, wouldn’t we all be enjoying the comfortable lifestyles that only the wealthiest few get to enjoy every day?
What if the answer is actually easier than we think…
Well, get ready, because we are about to answer this incredibly complex and life-altering perplexity. The answer may surprise you, and is actually simple. Setting smart, attainable, focused financial goals.

What is your current financial situation?

Before you can go much further, you will need to figure out your current financial situation. It doesn’t make much sense to plot and plan for tomorrow if you can’t afford to pay attention today.
Having a good overall snapshot of your current financial situation will better prepare you for setting realistic goals to help get you where you want to be in the future. Do you currently have a working monthly budget for all of your household expenses?
Budgets are not just for people who are struggling to make ends meet. They also help you better identify where your current money is going, and help you figure out where you can make some changes.
Once you have a good frame of reference for where you are currently at today, and where you want to be in the future, it’s time to start setting some goals!

Why We Need Financial Goals

Financial Goals
Setting healthy financial goals is one of the best ways to ensure a more secure and stable tomorrow. We all know that getting everything you want in life doesn’t always come easily. In fact, most of us have to work very hard to reach the financial goals we’ve set for ourselves and our households.
Setting goals is something that most people are very familiar with. Whether it is to graduate from college with the degree you’ve always dreamed of, or to finally buy your first home. Or maybe you simply want to take that family vacation before school starts back up. Whether we know it or not, most of us already have personal goals we have set for ourselves. We challenge ourselves to meet these goals nearly every day, and oftentimes rest our hopes of happiness and self-confidence on our ability to achieve these goals.
So why should setting financial goals be any different? Well, for many people, the moment you introduce money into the equation, the process becomes complicated and many people are simply unable to set realistic or relevant financial goals.
The fact of the matter is that we are all at very different places in our lives, financially speaking. Many Americans are struggling with getting out of debt, while others are not sure when or how to start preparing for retirement. While we are all at different stages and on different levels when it comes to financial security, every single person can benefit from setting financial goals.
Sadly, not everyone on this earth gets to choose their own destiny when it comes to planning for their future. But most Americans have this luxury and can make the choice today of how they want to live their lives tomorrow. But to make sure you end up in where you want to be financially, it is important to start setting some realistic and fundamental goals today.

How to get started setting financial goals

Goal Setting
The first step in the process is to establish what kind of goals are most important to you and your loved ones. You need to be able to get a perspective on the whole picture before you can start focusing on the smaller parts. The simplest way to begin the process of establishing your own personal financial goals is quite simply to sit and think.
  • Make a list. Sit down with a piece of paper and a pen and start brainstorming all of your hopes and aspirations for what your future will look like. Be sure to include in your list all of the people and things that are most important to you.
  • Talk with your family. Oftentimes, you may find that your vision of what the future holds is quite a bit different than that of your spouse or children. Talking about the future and what you each hope to get from it is the best way to make sure you are all on the same page.
  • Brainstorm. If you’re not the list making type, try flipping through magazines to get ideas, or talking to your parents or grandparents about their experiences in planning for their future. You could also choose to draw pictures or find alternative methods to figure out what is most important to you.
Some important questions to ask:
  • What are some of the things that you want to make sure you do not have to go without in the future?
  • Would you rather have a newer car or home or get to retire earlier?
  • Where do you hope to be ten years from now?
  • Are you currently living in the spot where you hope to retire?
  • Is it realistic to expect to be out of debt when you reach retirement age?
  • What are your family’s more immediate needs? Bills past due? Need a new washing machine?
This first step can often be the most enjoyable, but remember to stay focused on the task at hand. It is also a very important step, so don’t rush through it.

Prioritize your financial goals

Family Budget
Now that you have made a list of the things that mean the most to you and your loved ones, you can start to prioritize them. This may seem like a daunting task, especially if you have come up with a long list, but it can be quite simple to start setting them into place when it comes to their priority.
One simple method is to place each goal into one of three categories depending on their timing. Look at each item to decide if it is a:
  • Short-term goal. These items are the ones that need to happen in the next 12-24 months. These are the most pressing and immediate items on your list, and often include things like “paying off credit card debt” or “buy a more reliable vehicle.”
  • Medium-term goal. These items are ones that you can realistically attempt to complete in the next 2-5 years. This list should include things like “be debt free” or “pay off that student loan.”
  • Long-term goal. These are the goals that you have established that will either take more than 5 years to achieve or will not be a factor in your family budget for at least the next 5 years. It is important to still be mindful of these though, so you can properly prepare for them so they don’t sneak up on you “all of a sudden.”
A simple guide that we found on SinceMyDivorce ranks savings goals in the order below, if you’re stuck.
  • Emergency Fund (the “I’m no longer employed stash”)
  • Retirement Fund
  • College Savings
  • New Home Purchase
  • Vacation Home
If you are still brainstorming goals, start with an emergency fund of $1000, which many financial experts suggest to do immediately. Getting out of debt and paying off past due bills take priority over most savings though, so take care of those things before building up your savings.

Turn concepts into S.M.A.R.T. goals

We have all set goals at some point in our lives, but how many of us were successful in achieving them? Were our goals too unrealistic or far-fetched? Or were they even goals to begin with?
There is a big difference between a concept and a goal. A concept is a general idea of something that a person wants to achieve. “I want to cut back on money I spend dining out” or “I want to save enough money for my family to take a nice vacation next summer.” These statements may seem like goals, but they are actually just concepts.
Many people make the mistake of trying to label a concept as a personal goal, only to feel as though they have failed in the end. This is because they did not turn that concept into an actual achievable goal. Making this transformation from concept to goal is relatively easy – you just have to put a little thought and effort into it.
Be S.M.A.R.T.! This is a common acronym used to describe the method many people use to set realistic and clearly defined goals that are within their reach. There are 5 simple, basic principles associated with S.M.A.R.T. goals, which ultimately make them far easier to accomplish. (Financial Reflections)
These 5 rules include making sure the goals are:
  • Specific
  • Measurable
  • Attainable
  • Realistic and Relevant
  • Time Restricted
For example, let’s take this concept: “This year, I want to start saving money for my retirement.”And let’s assume the person in this example is a 50-year-old, single man who earns an annual salary of $52,000.00 per year.

First, our goal must be Specific.

Specific Goal
We cannot just say that our goal is “to save more money for retirement this year.” This is too vague of a statement/concept to be considered a goal, and will often lead to failure merely because of its ambiguity.
In order for a goal to be specific, it should answer the famous five questions: Who? What? When? Where? and Why?
  • Who? Who is involved in this goal? Is it a personal goal for myself, or perhaps one that should include my spouse and my family? Does it involve my employer, friends and family, or other people outside my home?
  • What? What exactly do I want to accomplish? Try using action based words (like “finish” or “pay off” or “set aside”) to describe what it is you are trying to attain.
  • Where? Where is this goal going to take place? Inside or outside my home, or maybe at work?
  • When? When will this goal take place? Will it be something that occurs all of the time or only in specific situations? Does this only happen during certain parts of the week or month or year?
  • Why? Why is this goal important? What are the specific reasons I would want to accomplishing this? How will I benefit from achieving this goal?
Making our concept Specific: “Since I have never saved for my retirement in the past, I want to start contributing part of my paycheck into the 401(k) plan offered by my employer. By electing to enroll in this plan, my employer will match 40% of all my contributions, giving my retirement savings a huge boost.”

Next, our goal needs to be Measurable.

How will we know that our goal has been achieved if it can’t be measured? Making our objective something that can be weighed, or quantified, also allows us to track how well we are progressing towards achieving that result. This lets us make adjustments when needed if we find that we are not making sufficient progress at any given point.
In order for a goal to be measurable, it should answer the question(s) how many/how much?
Making our concept Measurable: “Since I have never saved money for my retirement in the past, I want to start contributing 10% of my gross earnings into the 401(k) plan offered by my employer. With the contributions from my paycheck and the additional employer match portion, I want to have at least $10,000 in my account by next year.”

Third, our goal must be Attainable.

AttainableWe have to set goals that are realistically achievable, or else we are only setting ourselves up for an imminent failure. When setting financial goals for yourself, you also need to make sure that in order for your goals to be met, you are not relying on any outside source or circumstance that is not guaranteed.
For example, setting a financial goal to save a certain amount next year is a great start. But when figuring out how much you want to save, if you assume that you will get another 10% raise in March just because you got one last year, you are not being entirely realistic. Setting goals based on assumptions may put those objectives just out of reach when all is said and done. Make sure whatever goal you set for yourself is one that you are able to achieve.
In order for a goal to be attainable, it should answer the question how can I successfully reach my end objective?
Making our conceptAttainable: “Since I have never saved money for my retirement in the past, I want to start contributing 10% of my gross earnings into the 401(k) plan offered by my employer. With the contributions from my paycheck and the additional employer match portion, I want to have at least $7,000.00 in my account by next year.”(This is now attainable since the employee has the potential to contribute $5,200.00 from their pay, plus the employer match of $2,080.00 which equals $7,280.00).

Next, our goal must be Realistic and Relevant.

be realistic
It is great to dream big and push ourselves to achieve great things, but let’s also make sure we are keeping it real when it comes to our everyday lives. If a person has never managed to save a dime in their entire lives, while it may be mathematically possible for them to set a goal of saving $50,000 within a year, it is certainly not very realistic.
By setting unrealistic goals for ourselves, we are simply providing yet another opportunity for failure. When establishing financial goals, this is especially important since many things need to be taken into account. How much cash flow you currently are working with, what you are accustomed to, and how your new goals will affect other areas of your budget are all important factors to consider.
You may have some great goals in mind already, but another part of the “realistic and relevant” factor that should be considered is timing. While every aspect of a certain goal may seem perfect, when partnered with the wrong time in a person’s life, that goal can crash and burn before it ever has a chance of being achieved. Setting a goal to save big for retirement this year may sound great. But this same goal may not be quite as realistic if it is set during the same time that your oldest three kids are all off to private colleges, when your spouse was just laid off or you just purchased a new home. Keep the timing of your goals in mind and make sure this is the right point in your life to be setting certain objectives.
Additionally, making sure your goal is relevant is also important. If you really want to save some extra money for retirement, setting a goal to read a new retirement blog every day for the next year isn’t going to make those dollars start adding up. While education is always an important part of financial planning, make sure whatever actual goal you establish is relevant to your overall objective.
In order for a goal to be realistic and relevant, it should be within the realm of reason, worth the time and effort it will take to achieve it, as well as make sense in the grand scheme of things. It should also be the right time in that person’s life to try to achieve such a goal and not conflict with other needs.
Making our concept Realistic and Relevant: “Since I have never saved money for my retirement in the past, I want to start now by signing up for the 401(k) plan offered by my employer. By contributing 5% of my gross earnings into this plan plus the additional employer match portion, I want to have at least $3,500.00 in my account by next year.”

Finally, our goal needs to be somewhat Time Restricted.

Time Sensitive Clock
To truly know if you have been successful in achieving your financial goals, you need to establish some sort of realistic time frame that you are going to achieve them by. Having a “due date” or “deadline” not only gives you a standard by which to measure your overall success, but also can help keep you focused and on track during the process.
Saying that you want to start saving for a family vacation soon doesn’t allow you to fully establish that goal, and therefore won’t likely be achieved. But saying that you want to start saving $20 every week toward a family vacation next Thanksgiving establishes the needed timeline to reach that goal.
Setting time restrictions also lays the framework for realizing mini “check-points” throughout your journey. You can tell if you are on track to achieve your goal by setting smaller deadlines throughout and seeing how you are managing those.
In order for a goal to be time restricted, it should answer the question: when will I be able to have this done?
Making our concept Time Restricted: “Since I have never saved money for retirement in the past, I want to start saving this year by signing up for the 401(k) plan offered by my employer. By contributing 5% of my gross earnings into this plan plus the additional employer match portion, I want to have at least $3,500.00 in my account by the end of the first year.”

Set financial goals that you can achieve, and you will

Goal Setting
Setting S.M.A.R.T., focused and achievable goals isn’t easy, but do it right (and set a strict timeline) and it’ll pay off. When it comes to your finances, there will always be another goal to set, another milestone to overcome, and another something to save up for, so keep track of them. Even the richest of the rich set goals, and do it in such a way that each goal they set makes them just a little bit richer. (Lifehack)
Taking the advice from this guide won’t just help you protect your tomorrow. Setting financial goals will push you, challenge you, and inspire you to continue growing in your financial journey.

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Jennifer Leonhardi

Jennifer Leonhardi was born and raised on Catalina Island, giving her a unique small town perspective and focus on community. With a degree in Sociology, she now primarily enjoys writing, largely based on her own experiences, on topics such as financial assistance programs, issues concerning the home and family, and socioeconomic trends.

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