A Step-by-Step Guide to Setting Your Financial Goals

Women with laptop computer excited to reach her goal

You’ve got big dreams for your money. 

For you, that might mean owning a home, paying off debt, having some fun money to enjoy, living comfortably in retirement, and more. 

But how do you get there from where you are? And how do you juggle all the things you want to accomplish with your finances? 

The answer starts with setting financial goals. And the process is easier — and more powerful — than you might realize. 

What is a financial goal? 

A financial goal is simply an objective you want to accomplish with your money. Generally, there are three types of financial goals: 

  • Short-term financial goals are achievable within one year. Example: saving money for this year’s holiday spending 

  • Mid-term goals take a few years to reach. Example: paying off your car loan 

  • Long-term goals are achievable only after many years. Example: saving enough to retire 

When you set financial goals, you consciously focus on what you want your money to do for you and your family. And you use those goals to create an action plan to reach those dreams. 

Of course, most people have competing financial goals. Maybe you want to plan an upcoming vacation, pay off your mortgage, save for your kids’ education, and prepare for a happy retirement. By understanding and clarifying your goals, you can decide how best to allocate your resources. 

Start with the basics 

If you’re just starting out with setting financial goals, you’ll want to begin by laying a solid foundation. 

Putting the fundamentals in place accomplishes two things. First, you’ll create the framework that will allow you to work toward all your other financial goals. Second, you’ll score some quick wins right out of the gate — so you can see positive changes right away. 

So, tackle these tasks upfront: 

1. Create a budget 

A personal budget is a spending plan for you or for your household. It clearly lists out all your sources of income, your expenses, your debt payments, and your plan for savings. And having a budget makes it easy to see your finances at a glance and create a strategy to accomplish your financial goals. 

Fortunately, building a budget doesn’t have to be intimidating. You can start with a basic budget to get yourself started. Or enter your financial details into a ready-made budget template

2. Open an account for your emergency fund 

When the unexpected happens, an emergency fund is there to cover the cost and save you from dipping into debt. Over time, you’ll want to save enough money to accomplish that goal. 

For now, though, start by opening a dedicated savings account for your emergency fund. We’ll work on adding to that account’s value in a later goal. 

3. Set up a filing system for financial documents 

Disorganization can cost you when it comes to your money. You miss due dates for your bills, lose track of critical paperwork, or struggle when it’s tax filing season. 

Take the time now to create a simple but effective system for storing your financial paperwork. Keep in mind that you’ll want to organize both physical paper and digital documents for easy access. 

4. Set up a system for paying your bills on time each month 

If you’re juggling multiple bills, credit card statements, and loan payments each month, you might struggle to keep it all straight. And it’s easy to be late on a payment or forget one entirely. 

Automation might be an easy solution for you. Set up automatic bill pay or recurring transfers through your bank account, so you’ll never be late again. 

Examples of financial goals 

What you tackle next with your money depends on your current financial situation and your individual desires. But here are some areas of focus you may want to consider: 

1. Flesh out your emergency fund 

First, determine a target dollar amount for your emergency fund. Then look at your budget and include emergency fund savings as one of your monthly expenses. Commit to saving a specific amount — whether that’s $50 or $500 — every month until you hit your goal. 

2. Pay off credit card debt 

Eliminating debt frees up cash for your other goals. If possible, include accelerated debt repayment in your budget, so you’ll be debt-free faster. 

3. Amp up your income 

More money coming in gives you more options for spending, saving, and paying down debt. Consider seeking a raise, working overtime, switching jobs, increasing your marketable skills, or starting a side gig to earn more. 

4. Cut your expenses 

Get some additional breathing room in your budget — particularly if you’re currently spending more than you’re making. Look for creative ways to reduce the amount you’re spending. 

5. Improve your credit health 

Bad credit can hurt your chances of getting financing and cost you money. So put a few new habits in place to boost your credit score over time. 

6. Protect yourself with insurance 

Even the best financial plan can be upset if disaster strikes. Protect your family and your income by buying the insurance coverages you need. Consider health insurance, disability insurance, and life insurance policies. 

7. Save for retirement 

Saving for your golden years is probably your longest-term financial goal. Sign up for your employer’s 401(k) plan, particularly if they offer you a contribution match. And aim to save a percentage of your earnings every year you work. 

8. Save for college 

If you’re planning to contribute to your kids’ college education, save regularly in a tax-advantaged account. Explore 529 plans offered through different states, or open a Coverdell Education Savings Account

9. Buy a home 

If you dream of owning a home, work on putting together a down payment. Plan to save each month in a savings account dedicated to your future home.  

How to set your own financial goals 

Are you ready to create a vision for your own financial goals? Follow these simple steps: 

1. Create a master list. 

Write down all of your goals in one place — short-term, mid-term, and long-term dreams. Break the big ones down into a series of mini goals or milestones. 

2. Prioritize your list. 

You can’t do everything at once, so decide what’s important for now versus later. Separate your must-haves (e.g., saving for retirement) from your nice-to-haves (e.g., buying the latest phone). 

3. Clarify your goals. 

Solidify your intentions by translating your list into S.M.A.R.T. goals. Be sure to note important deadlines alongside your goals as you go. 

4. Align your goals with your budget. 

You’ll want to ensure your plan for saving, spending, or debt payment fits with your income and current expenses. Play with your budget to find the right balance. 

5. Adjust your plan as needed. 

Not enough cash to reach your goals? Revise your list or tweak your lifestyle. You might boost your income or slash your expenses to free up extra money. 

6. Test out your plan. 

Try living with your new financial plan to see if your goals are realistic and achievable. Adjust as necessary, particularly if your goals or life circumstances change. 

7. Track your progress. 

Use automated tools to get a comprehensive view of your finances and where you stand. Check your progress regularly. And aim for mini milestones as you move toward those big goals. 

8. Reward yourself. 

Pick an inexpensive or free reward whenever you complete a goal or reach a milestone. Celebrate your success and motivate yourself to keep going! 

Your financial goals represent some of your biggest dreams. So, it’s up to you to be the driving force that makes them happen. With a clear view of your goals and an action plan behind them, you can move toward them confidently. 

The material presented here is for informational purposes only and does not represent specific financial advice to you or your circumstances personally.