Setting money goals can ultimately help you become more financially secure and grow your wealth.
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Do you have an idea of where you want to be a year from now?
How about five years? Ten?
Whether or not you’ve thought that far in advance, goal-setting is a crucial part of your personal and professional development.
And oftentimes, your goals are connected to your finances. For instance, your big travel goals to visit all Seven Wonders of the World, or your more scholarly wish to get a master’s in the subject you love—those don’t come for free.
As unfortunate as it may sound, some of your ambitions simply need to be funded not just by passion but by money—making it an absolute necessity to set financial goals for yourself.
Why set personal financial goals?
Brian Tracy said it best in his book, Eat That Frog:
“Goals are the fuel in the furnace of achievement.”
What exactly does this mean?
The simple act of setting a meaningful and actionable goal helps build momentum for achieving it. This is because it gives you a clearer focus on what to aim for—and this is relevant even in terms of personal finance.
Whether you’re making just enough to get by or find yourself with some extra income (lucky), setting a financial target gives you something to base your finances around. Not to mention, we all inevitably need money at some point in our lives, so it never hurts to have a goal to save a certain amount per month.
And in this way, applied to your finances, setting goals can help you become more financially secure and grow your wealth.
Types of Goals
Goals don’t come in just one shape or size. There are different types, namely short-term and long-term financial goals, and you should ideally have a combination of both.
What’s the difference?
Short-term financial goals take less than one year to achieve, while the time frame for long-term goals is much longer—more than a year, even as long as a decade or more.
Below are examples of each type of financial goal.
|Short-Term Goals||Long-Term Goals|
Some financial goals may be a bit hazy depending on the amount of time necessary to achieve them—for instance, paying off credit card debt or taking care of major home repairs. They may be more specific to your circumstances, and depending on their time frame, you can even think of these goals as mid-term ones.
4 Tips for Setting and Achieving Your Financial Goals
1. Make “SMART” goals.
Maybe you’ve heard of the SMART acronym before—it’s a useful set of guidelines to follow when setting any kind of goal. Specifically, it stands for the following criteria:
- Specific: Avoid being general, and instead specify what exactly you want to achieve.
- Measurable: Without some degree of measurability, it’s impossible to track your progress in achieving a goal.
- Attainable: Setting a distant and elusive goal can be more discouraging than motivating, so make sure yours is realistic.
- Relevant: You need to set meaningful goals that align with who you are, your interests, and your skills. Irrelevant goals leave you questioning whether they’re worth pursuing, and can thus be harder to commit to.
- Time-bound: When do you expect to achieve your goal by? Setting a time frame is necessary, or else your goal might always remain on the distant horizon.
Applied to your finances, here’s what the difference between a non-SMART and a SMART goal looks like:
- Non-SMART: Earn more money
- SMART: Earn an additional $300 per month through a side hustle
2. Break down big goals into smaller ones.
Whether it’s buying a home or taking a year off of work to travel, you might have a particularly lofty goal that’s far from your finances’ immediate reach. If you can maintain the motivation to pursue such a goal, that’s great!
But for many, it can feel overwhelming, even impossible—and ultimately dissuade them from chasing it in the long run.
For goals of this nature, consider breaking them into smaller objectives. This will have a psychological effect of making your goals feel more tangible and within reach.
For instance, saving a $40,000 down payment for a home can be downright intimidating. But by breaking it down into a smaller goal, like setting aside $200 from every paycheck, it’ll seem a lot more manageable.
3. Get your goals down in writing.
Whether it’s in a notebook, planner, or a spreadsheet on your laptop, you can benefit from recording your goals somewhere rather than keeping them as simply mental notes.
What’s the point of writing down your goals?
Research by psychology professor Dr. Gail Matthews shows that people who wrote down their goals saw a significantly higher success rate in achieving them compared to individuals who simply thought about their goals.
Help keep your financial goals at the forefront of your mind by writing them on a sticky note and posting it on your fridge or mirror. Or, for extra intentionality, make your goal your laptop password! It won’t be easy to forget your priority to “make more money” if you need to type it in each time you log online.
And if goal-setting worksheets are your jam, look no further than these helpful templates:
- General Financial Goal Worksheet from Ally
- Financial Goal-Setting Printable from Financially Minded Millennial
- Debt Repayment Trackers from Debt-Free Forties
- Track Your Net Worth Spreadsheet from Money Under 30
Or, for some more creative freedom, consider investing in a bullet journal to track your financial goals.
4. Find an accountability partner.
An accountability partner is someone who’ll help you stay on track and commit to achieving your goals. It’s easy to lose motivation, after all, and when you keep your goals to yourself, they have all the more possibility of slipping through the cracks.
In fact, in the same goal-writing study by Dr. Matthews, participants who shared regular updates with a friend about their progress saw the highest levels of goal achievement.
So find a buddy who you’ll be comfortable regularly chatting with about a specific goal.
An accountability partner could be a friend, relative, coworker—really anyone invested in your personal success. And this relationship doesn’t have to be one-sided; you can ask for your partner’s own goals so that you can both benefit from increased accountability.