How to Set Financial Goals and Achieve Them

Having financial goals is important. As is the case with any aspect of your life, when you don’t have goals, you’re just kind of wandering along, doing whatever feels right at the moment, and hoping that it all works out in the end.

That’s an incredibly unsafe way to manage your finances.

Many people incorrectly assume that financial planning only applies to the super-wealthy. While it’s true that those with diverse investment portfolios often work with financial planners, that does not mean that everyone can’t benefit from having a plan in place as to what they’re going to do with their money.

Maybe you weren’t taught about financial literacy, budgeting, and other important parts of money management when you were younger. That doesn’t mean that you’re doomed to spend the rest of your life in financial limbo.

Today, learn more about how you can set financial goals and how to turn those dreams into a reality.

Get Your Priorities in Line

Begin this process by listing all of your financial goals. At this stage, you don’t need to put them in any particular order.

Just take some time to think about what you want to do with your money, where you hope to be financially within the next year, in the next five years, and even in the next 10 years. Write all of these goals down, regardless of how big or small they seem at the moment.

Once you have all of your goals written down, start putting them in order. During this phase, you can rank them by importance or by how long it will take you to accomplish them.

For instance, if you have a credit card with a $900 balance on it, you can pay that off quicker than you can save up to $10,000 to purchase a used car. If you choose to rank your goals in order of ease, the credit card is going to be easier than the car.

However, if you don’t live anywhere near your place of employment and you’re not sure how you’re going to get to and from work, getting a reliable vehicle may be more urgent than paying off a card with a low balance.

Ultimately, the way that you rank your financial goals largely depends on your personal financial status.

It’s also important to know that setting financial goals doesn’t mean that you can only accomplish one goal at a time. Be sure to look for opportunities to knock out more than one goal on your list along the way.

Make Your Goals Measurable and Specific

When you’re setting financial goals, you need to be specific. Don’t write things on your list like “save money” or “buy a car.”

Instead, put dollar amounts on every goal. Saving money is simply too broad of a term for it to be useful when trying to achieve your dreams.

Are you trying to save up a $1,000 emergency fund, or are you trying to save enough money to use as a down payment on a home? Are you saving for retirement in 40 years, or are you saving for a vacation?

You can put all of those goals on your list, but when you do that, be sure to put the dollar amount that you’re trying to build to.

Think of your financial goals like a map.

If you’ve never used a map to get from one place to another, you can think of them like the GPS on your phone. If you have never driven to the Grand Canyon, you’re not just going to put the word “Arizona” in your phone’s GPS. If you’re using a map, you’re not just trying to get to the southwestern region of the United States.

You want to get to a specific location, so you need to be deliberate with what sort of information you use. In the same vein, when you’re trying to follow a financial roadmap, you need to be specific.

When you have a specific destination on your GPS, you can measure how close you’re getting to it. That’s how your financial goals work, too. Don’t say that you’re saving money for a car. Identify your budget and set the amount that you need to come up with to buy the vehicle.

Identify Your Motives

Many people incorrectly assume that their financial goals are just about having more money. That’s not the case at all. Everything that you do with your finances has a motive behind it, and you need to know what those motives are. Your motives will largely dictate how successful you are in achieving your goals.

Do you want to pay off your credit card debt because you want to improve your credit score and put yourself in a position to buy a home?

Or, are you trying to pay off your credit card debt because you want to run up more debt on the same credit card later on, purchasing things that you can’t really afford?

This is not an indictment on credit cards. They can be very useful tools, especially when you’re trying to get on your feet financially and run into an emergency.

However, they can also seriously damage your financial future by making you feel like you can just keep spending money that you don’t actually have.

When your financial goals are about creating a better life for yourself, you’re much more likely to succeed.

If your goal is to save up money so you can buy the things that the people around you have, you’re never going to reach the mark because someone will always have better stuff than you have. Make sure that your goals are about creating a good future for yourself and your family.

Monitor and Celebrate

One of the biggest mistakes that people make when trying to achieve financial goals is failing to celebrate the milestones that they meet along the way. Another mistake involves going overboard on celebrating those milestones and doing more financial harm than good.

While you’re pursuing your financial goals, it’s crucial that you regularly evaluate where you’re at on your journey. You’re not going to make your financial dreams a reality without some deliberate action. This means that you need to be plugged into what’s going on with your budget at all times.

When you’re monitoring your progress, don’t be afraid to celebrate the milestones that you reach, but keep those celebrations within reason.

For example, if there’s an outfit that you’ve been wanting to purchase and you’ve just paid off a credit card, buy the outfit. Don’t put it on the credit card, though. Use some cash that you’ve built up on your journey and treat yourself to the outfit.

Celebrating shouldn’t put you in a bad financial position, so be mindful of how much you’re spending by treating yourself.

However, if you don’t ever reward yourself for your hard work, you’ll lose motivation. Be responsible with how you celebrate, but be sure that you’re taking the time to congratulate yourself for your hard work.

Remain Adaptable

Your journey to financial freedom is not going to be linear. Along the way, you’re going to run into some roadblocks, and you’ll probably have to detour.

That’s why it’s a good idea to make building an emergency fund one of your first financial goals. This fund will serve as a layer of protection against emergencies that you may encounter along the way.

For instance, if your next financial goal is to pay off a personal loan, but your car breaks down and the repairs are going to cost $750, having an emergency fund can help you stay on track without neglecting your needs.

Even if something happens that throws you off for a bit, don’t let it completely derail your plans. The commitment that you’ve made to improving your finances goes beyond a single issue that you run into along the way.

Being adaptable is crucial when trying to keep yourself motivated to stay on track. Just because something happens doesn’t mean the goal is gone forever. Instead, it just means that you need to take care of the problems that you’re facing and get yourself back on track.

It’s Your Time to Shine

What you do with your money is ultimately your decision. However, if you're trying to get better at money management, these tips can help.

No matter how unrealistic your goals seem today, you can achieve them. Spend some time evaluating how much money you make and where you want to be on your financial journey in the short-and-long-term.