Learning how to set financial goals is an important step toward having control of your finances. I believe financial goals are really just life goals. Money is a tool that enables you to achieve everything else in life, so setting financial goals that correspond with your dreams is important. I’ll walk you through how I set my financial goals and created a plan to track my progress!

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How do you come up with financial goals?

So where do you even start? Like I said, I believe financial goals are life goals. First, you need to figure out what you want from life.

Here’s what I want you to do. Sit and close your eyes for the next 2 minutes and think about your DREAM life. And I mean it. DREAM LIFE. Do you want to own a farmhouse on 100 acres and have 6 kids and 20 dogs? Do you want to live in a big city and own your own business? Write it all down. Your dream life is anything and everything you imagine in your perfect life.

For me, I imagine getting up early and heading out to the deck of our lakehouse with a cup of coffee and my laptop. I get to work on my business with a great waterfront view and get to enjoy setting my own schedule.

You’ll know you’re on to something if you get excited just thinking about it. Get detailed when you think it through, too. The more detailed and specific you can get about what you want out of life, the better financial road map you’ll be able to create! Visualize it all.

Once you’ve thought about your dream life, start to think about what your finances will look like in that situation. Will you get to retire early at age 40? Will you work until you’re 70 because you own your own business that you’re passionate about? See what I mean about financial goals being life goals? Think about how your financial situation will impact your ability to achieve your dream life.

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    What is a good financial goal?

    There’s no right answer to this question but I can still help you out here. This will look different based on what your dream life looks like. If you want to retire early, a good goal might be maxing out your retirement every year and creating a plan to get investing in mutual funds. A good financial goal is one that is going to put you where you want to be in life in the long run.

    You don’t want an instant gratification type goal here. Your goal needs to think long haul and help you achieve your dream. It might have short term implications. Back to the example of retiring early, maxing out your retirement account every year might mean skipping the Starbucks line every day to meet that goal.

    A good financial goal is one that inspires you and makes you excited about achieving it. I know it can be hard to get excited about saving for retirement. But just think about how nice it feels when you have a day off. You can sleep in and do whatever you want – that’s retirement life. You need to be able to visualize your goal in order to achieve it.

    Now we’re going to take those general ideas for your goals and turn them into a plan!

    How to set SMART goals

    I think the best kind of goals are SMART goals. I definitely didn’t come up with this method, but there’s a reason it’s taught in tons of courses and in probably every business school everywhere. The SMART method not only helps you set your goals but also create a framework for achieving them.

    So the SMART method. SMART stands for:

    • specific
    • measurable
    • attainable
    • relevant
    • timely

    So let’s break those ideas you had about possible financial goals into SMART goals.

    I’m going to use one of my financial goals as an example to walk you through it. Paying off my Discover card is my top financial priority right now. Let’s turn that into a SMART goal.

    Specific – this is the who, what, when, where, and why of your goal.

    The more specific your goal is, the easier it will be to set specific steps to achieve it.

    Starting off my Discover card example: I want to pay my card down to a balance of zero by the end of the year and drop my credit limit to $3,000 as I go in order to reduce my monthly expenses and move toward my ultimate goal of debt freedom.

    • who – Discover card
    • what – pay it off to a zero balance and drop my credit limit to $3,000
    • when – by the end of the year
    • where – check progress through the app/online
    • why – to reduce my monthly expenses and help me be #debtfree

    Measurable – how much, how many, how will you know when your goal is done?

    The point of this step is to make your goal trackable (apparently not a word, so don’t use it in a work email). You want to be able to see what kind of progress you’ve made. So quantify your goal – give is some numbers to measure against. How much money do you want to save? How many no spend days will you have each month? Give your goal some numbers that you can track.

    I will know I’ve paid of my Discover card when I don’t owe them any more payments! This one is pretty easy to measure. I know the balance of my credit card at all times by looking at my account online or through the app. I know how much it is and I can see the balance change as I pay it. My goal also includes paying this off by the end of the year, so it has a time frame to measure progress by as well. I could even break it down into a monthly amount I needed to pay to pay it off by the end of the year.

    Attainable – is this goal realistic?

    A goal that is attainable is one that you can reasonably expect yourself to achieve. So can you create steps to achieve this goal right now? Or do you maybe need to set a couple of other goals to get you ready to hit this goal? You might have to learn new skills, find extra income, go back to school, etc. in order to reach your goal. If you’re realistically able to overcome those obstacles with a little work, then your goal is attainable.

    Using my Discover card example – this is attainable. I make enough money to set and stick to a budget that will enable me to pay off my Discover card by the end of the year. It is definitely possible. I do have quite a few bills I pay though. I will have to find ways to cut expenses and remove things from my budget – or increase my income – in order to hit this goal.

    Relevant – will this help me reach my dream life?

    Ask yourself if this goal will really move your forward toward your dream life! How will this goal improve your overall financial picture and enable you to do the things you ultimately want to do?

    Paying off my Discover card definitely helps me move toward my dream life. I would like to retire early, and having no debt will enable me to invest more and invest sooner. Having no credit card debt is a big step for me toward being debt-free.

    Timely – when can I work on and complete this goal?

    When do you want this goal to be completed? Set a deadline on your goal to help hold yourself accountable. Then, decided what you can do between now and then. Set steps to take weekly, monthly, quarterly, yearly, etc. The more you’re able to break your goal down into smaller pieces, the less overwhelming the entire goal will be and the more motivated you will be when you finish each smaller step.

    My goal is to have my Discover card completely paid off by the end of the year, so December 31st. I do a budget and track my spending to help find extra money in my budget I can pay toward my Discover card.

    We have our goals and some benchmarks to check our progress. Now let’s write out a plan to achieve them!

    How do you achieve financial goals?

    I’m not going to lie to you, this will be by far the hardest step. Writing them down will help, but you can’t just write down your goals and expect them to just happen. Here’s where you put in the work.

    Remember back in the “timely” step when I said to break your goals down into smaller chunks on a weekly, monthly, or yearly basis? We’re going to do that now. And we’re going to set some deadlines.

    How to create a goal map

    I don’t know if anyone else calls this a goal map, but I do. It’s a road map to reach your goals, so goal map.

    So you’ve written down the SMART sections of your goal. So WHEN does your entire goal have to be done? Set a hard deadline on it. Next, what intervals of time can you use between now and your deadline to track your goals? Weeks, months, etc. Choose an interval to use to track your goal. Figure out what you need to do for each time interval to reach your goal.

    How to Set Financial Goals

    You can think of these intervals as mini-goals. You want to strive to accomplish each smaller section of the goal so you make it to the big ending goal!

    Think of other ways you could break your goal down into smaller chunks. If your goal is something you have to work at every single day, find a way to break that into steps you can check off. If you’re trying to have 15 no spend days a month, check off every time you reach five. The smaller of pieces you can break a large goal into, the easier it will be to stay on top of and the easier it’ll be to achieve!

    Write your goals down

    Write this all down somewhere you will ACTUALLY look at it. You are more likely to stick to your goals – and therefore achieve them – if you write them down! Find a place where you can write out the goal and the steps it’ll take to achieve it. Seeing each individual step will help you keep from getting overwhelmed.

    If you use a planner, this could be a good place for your goals (assuming you actually look at your planner). You’ll be able to break your goals down by month and track your progress that way. If you don’t use a planner, you may want to set up a notebook or spreadsheet to help you keep up on your goals. You’ll be able to easily see your progress – that progress will motivate you!

    How do I stay motivated to reach my goals?

    The biggest thing that helps me stay motivated to keep working towards my goals is being able to visualize them. You can do this by thinking back to your dream life whenever you feel like you’re spinning your wheels. This is another reason why I think it’s so important for your financial goals to be designed to really support the life you want to live.

    Find ways to make tracking your goal fun. I use shiny metallic stickers in my budget planner to mark the days I didn’t spend any unbudgeted money. The stickers motivate me (don’t judge). Find a tracking system that motivates you!

    Find accounts on social media that are related to your goal. If you’re trying to pay off debt, #debtfreecommunity is a great hashtag to follow on Instagram. Look for other like-minded peers that you can find inspiration from (you might even make some new internet friends)!

    You can also try creating a vision board. This is a place where you gather a bunch of pictures and quotes to help you visualize your goals. If you search on Pinterest you can find tons of different photos that relate to your goals. Put your board somewhere you’ll see it every day so it can constantly inspire you to reach for those goals!

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      Find a support system

      You should also surround yourself with people that will help you reach your goals and push you to succeed. We all have those people in our lives that either make or enable us to make bad decisions. Avoid these people! Find friends who are supportive and understand how your sacrifices and changes will ultimately lead you to live the life you want.

      Setting financial goals and a plan of action to support them can move you so far forward toward the life you really want. Get started on creating your goals today – you’ll be amazed how far you can get in the next few months!

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      How to Set Financial Goals