How to Set your Financial Goals and Reach Them 6 Simple Steps

How to Set your Financial Goals and Reach Them: 6 Simple Steps

If you’re concerned with pursuing financial freedom, one of the important parts of your financial planning should be setting SMART financial goals. In this article, I will be explaining the steps to setting financial goals with many personal financial goals examples and tips that would help you reach your money goals.

Let’s start with understanding the meaning and significance of financial goals.

6 Simple Steps to Setting your Financial Goals and Reaching Them

What are Financial Goals (also Money Goals)?

I like Annuity.org’s definition of financial goals as specific and measurable milestones that bring you closer to your ideal future as you actively strive to reach them.

I also like this definition of financial goals by Joel Johnston as savings, investment, and spending targets that you hope to achieve over a set period.

This means that your saving goals, investment goals, retirement goals, etc are all part of your money goals.

Why are financial goals important? Why should I set financial goals?

Sometimes, it seems like this personal finance thing is a lot of trouble, doesn’t it?

There are all kinds of things to take care of and review like financial goals, financial plans, investment tracking, savings, emergency funds, etc.

But taking care of your personal finance is actually very important if you don’t want to get to the age where you should be thinking of retirement but can’t because you have no savings, investments, or assets, just debts, and liabilities.

Here are a few reasons why you should set financial goals:

  1. Writing down your SMART financial goals and reviewing them regularly is the only way you can reach them.

Let me explain this better, if you haven’t written your SMART money goals, how do you know what you want to achieve with your finances, and most importantly, how do you measure your progress?

  1. They serve as motivation.

As you measure and achieve certain milestones in your short-term financial goals, you get more and more motivated to reach your mid-term and long-term financial goals. Reviewing your progress or lack thereof also gets you fired up to work harder on your money goals.

  1. I don’t know if it’s just me but there’s a kind of satisfaction inherent in understanding my financial situation and what I need to do to get to where I want to be, financially.
  2. They help you get rid of your conscious or unconscious bad money habits.
  3. They help you build for the future and your retirement. You don’t want to work until you die, do you?
  4. They help you avoid a debt-laden life.

Credit cards, loans, etc are so tempting but they can become big stressors when you have built-up heavy debt. Owing money can have many negative implications not just on you but on your family and friends. Having a financial plan backed strongly by SMART money goals keeps you conscious of where you are financially and prevents you from suddenly waking up and realizing that you have a $5000 debt somewhere.

3 Types of Financial Goals with Personal Financial Goals Examples

1. Short Term Financial Goals (3 months to Five Years)

Your short term financial goals are usually money goals that you want to accomplish within the next 3 months, within the next 1 year, or within the next 3-5 years)

Short Term Personal Financial Goals Examples:

  • Credit Card Debt Payments.
  • Building an Emergency Fund.
  • Saving Money to buy something or for a Specific purpose like Travel, or a Wedding.
  • Buying a Car.
  • Making a Certain Amount of Money Weekly, Monthly, or Annually.
  • Starting a Side Hustle.
  • Getting Financially Educated: Read Financial Books, Listen to Financial Podcasts and Take Courses.
  • Developing a healthy financial lifestyle or habit.
  • Developing a smart budgeting system.

2. Mid-Term Financial Goals (3-5 years)

Mid-term or Intermediate financial goals are the gray area goals that somehow fall between your short-term and long-term financial goals. They are usually money goals that may take a few more years to accomplish.

Mid Term Personal Financial Goals Examples:

  • Quitting your job and building other sources of income.
  • Creating Multiple Streams of Income
  • Paying off your Mortgage
  • Paying off your Debts
  • Money Savings Goals Amounts
  • Making a Certain Amount of Money Weekly, Monthly, or Annually
  • Starting a Business

3. Long-Term Financial Goals (more than 5-10 years)

Long-term financial goals are Big-Picture Goals, that is, goals that are related to what you want your finances to look like in the future.

Usually, long-term financial goals may take several years or even decades to reach depending on your chosen method for achieving them.

It is also quite easy to forget about or disregard your long-term goals when making financial decisions because it seems distant and involves much more money than your short or mid-term goals. But most times, your financial decisions can affect your long-term goals.

Let me add in this quote from the book I’m currently reading: “The Richest Man in Babylon.” which was actually to encourage budgeting but explains wonderfully the importance of your long-term financial goals.

“It is to enable thee to realize thy most cherished desires by defending them from thy casual wishes.”

As far as I’m concerned, the best way to keep your head in the game thinking long-term rather than short-term is by reviewing your financial goals, plans, and situation regularly just like my very regular “Get My Head in the Game Sessions” with myself.

Long term Personal Financial Goals Examples:

  • Build Generational Wealth.
  • Save a certain amount Towards your Retirement Funds by a certain age.
  • Save for your Child’s College Tuition.

Frankly, your long-term goals should depend on you, how you want your finances to look in the future, and your sources of income.

While setting your financial goals, you also have to keep unexpected expenses and rainy day expenses in mind. These expenses can be managed with emergency funds savings.

6 Steps to Setting your SMART Financial Goals

How to Set your Financial Goals and Reach Them 6 Simple Steps 2

STEP 1: Understand and Write Down your CORE Financial Values

Before you start setting your financial goals, you should probably understand your CORE financial values which is what is going to keep you going all through the period of trying to reach your money goals.

Want to stick to your financial goals and good financial habits? Then get something to motivate and inspire you – your core financial values.

It may be hard to explain what core financial values are so let me give you some examples:

  • Financial Freedom
  • Financial Security
  • Building generational wealth
  • Recognition
  • Hatred of debt

Many people have values that they live by in their lives that consciously or unconsciously guide their actions. You want to think carefully and write the values that guide your money decisions.

Let me give you some context based on myself. I hate debt. In fact, from a young age, I have always hated debt probably because I’ve seen how destructive it can be. So I’m one of those people who will never borrow and if I hear words like loan/credit, I usually frown. And funnily, this is an unconscious value that I didn’t know I had until I started doing some self-discovery this year.

This value is one of the reasons why I always go all-out to work for money when I need it and save up to the sum needed rather than borrowing.

Let me give you an example from my life. When I was trying to get admission into the University, my first attempt was a failure so I had to stay at home for a year. One of the suggestions from people around was that I am sent to a private school but I refused. I was unwilling to let my parents take loans to send me to a private school where I would need to pay N500,000+ per semester in tuition fees. Instead, I stayed home for a year and worked very hard to get admitted to a Federal University where my tuition fees per semester were N20,000+ (I think N20,090, can’t remember very clearly). This was all due to my unconscious financial value of Debt Hatred.

Here’s a life value quiz from NEFE to help you understand your core financial values.

STEP 2: Understand the Best Rule for Setting Financial Goals

Your financial goals should be SPECIFIC, MEASURABLE, ACHIEVABLE, REALISTIC, AND TIME-BOUND.

Why?

Because that’s the only way you can set and achieve them.

Vague goals will not work at all because you don’t know exactly what you’re trying to achieve.

An example of a SMART goal:

  • Save 10% and invest 10% of my salary throughout the year 2022.

Breakdown

  1. You’re going to do something with 20% of your salary as you receive it every month in 2022 – SPECIFIC
  2. 20% of your salary is very MEASURABLE. Even if you have a side hustle, you’re not touching it. You’re only saving and investing from your salary.
  3. As long as you’re disciplined, this is very ACHIEVABLE.
  4. Except you’re in debt (in which case you should be paying off your debt and building your emergency fund), this goal is pretty REALISTIC.
  5. You’ve already stated that you want to do this every month in the year 2022. That’s TIME-BOUND.

Other SMART Goals:

  • Pay off my $2500 credit card and student loans before December 2022.
  • Build up my emergency fund to $2000 by August 2022

STEP 3: Understand the Pillars of your Money Goals: Your Income Streams

personal financial goals evaluate income streams

After you understand the rules for setting SMART financial goals, you also need to understand the pillars of your money goals. Without them, your money goals will fall flat on their faces.

You can’t save or invest without having some income coming in. And in the day and age we live in with wild inflation and increased prices of everything, one stream of income is not going to cut it. You need as much as possible.

In this step to setting your financial goals, you need to write down your current income streams and potential income streams (side hustles you plan to build or are building to increase your streams of income and your overall income).

STEP 4: Write Down your Financial Goals and All that is Needed to Reach Them

Based on the three types of financial goals I have stated at the start of this article, you can now write down your list of financial goals.

Categorize them under short-term, mid-term, and long-term goals.

And make sure that your money goals are SMART so you can measure and review them.

As things change in your life, you can change things up and make changes when necessary.

My financial goals note taking guide:

  1. Write down one SMART financial goal. It must be smart, measurable, actionable, realistic, and time-bound.
  2. Is this goal short-term, mid-term, or long-term? Write that down below your SMART goal.
  3. Evaluate and determine how much money you need to reach this goal. For example, if you’re saving 20% of your salary throughout 2022, how much is that every month? And how much is the eventual value?
  4. What are you going to need to do to meet this goal? Evaluate carefully to decide the best combinations of things you will need to do to reach your goal and write them down.

For Example: For our “20% savings from your salary” goal, you can:

  • Set up automation from a savings app or account to deduct so and so amount from your salary every month.
  • Cut your expenses.
  • Build extra income streams to pay for your other expenses that 80% of your salary can’t cater to.

STEP 5: Build Your Financial Plan: Map Out the Actions you can take to achieve them

I already wrote an article on the 9 steps to creating a reliable financial plan. One of the 9 steps is setting SMART financial goals.

Once you’re done with setting your financial goals, you also need to go through the remaining eight steps to build your personal financial plan. It’s your financial plans that give you a big picture of your current financial situation, your short and long-term money goals, and the strategies you plan to use to achieve those goals.

So build one ASAP if you don’t already have one. And make sure to review it regularly (at least in 2 month periods).

STEP 6: Set the Time for Reflection and Review

personal financial goals refelect and review

Despite writing down your goals, forgetting them is very very easy.

That’s why you need time to reflect and review how far you’ve come or if you’re lagging behind.

It doesn’t even matter if you’re lagging behind. What’s important is knowing whether you’re lagging behind or not.

Templates and Apps for Setting your Financial Goals and Reaching Them

1. Frugal Confession’s free money saving goals tracker

financial goals money saving goal tracker template

2. Notion’s financial tracker by Zoe Chew: https://www.notion.so/Finance-tracker-56ef60778c9e406aaac3d5061b50ccfb

financial goals template notion finance tracker

3. OppU loan’s Financial Goals brainstorming sheet, goals setting worksheet 1, and goals setting worksheet 2.

4. The Setting Goals Financial Note Taking Guide by the University of Arizona

5. AutoSave with PiggyVest in Nigeria

6. Emergency Fund Plan with Cowrywise

Tips for ensuring you meet your goals / How to reach your financial goals

1. Create a Reward System for when you reach your money goals or certain milestones you’ve set.

2. Don’t beat yourself up when you make mistakes or have setbacks.

3. Learn When to Say No (to those who want to borrow but will never pay back or those who want your funds for shady investment schemes)

4. Surround Yourself with Like-Minded People

Find a community of people with similar goals or mentors that have achieved similar goals that you want to achieve.

If your money goals are related to getting rid of your debts, saving money, or investing money in property or crypto, you could find groups of people with the same goals or people who have achieved those goals. Those are the types of people you should surround yourself with because they keep you motivated and keep you accountable.

You can find a community of people with similar financial plans through Facebook Groups or forums. You can also find and relate to people like that in personal finance books or on Youtube. You could also get an accountability partner or a personal finance coach or mentor depending on your needs.

5. Keep your Goals in Close View

It’s very easy to forget our goals because of instant gratification and other reasons. That’s why it is very important to keep your goals in close view and review it regularly.

You should try to go over your goals every month to ensure you don’t forget them and they don’t skip your mind.

6. Stay Motivated

It is easy to set a goal but it’s also really easy to forget it or lose the necessary motivation to complete it because it seems so far in the distant future.

That means that just setting your financial goals and making financial plans alone won’t work. Consistency is key and consistency is fueled by motivation, therefore, motivation is key to your success.

Regardless of your goals, setbacks, failures, and even those times you fall off the grid because of a lack of motivation, what is important is that you get back up, re-motivate yourself, stay focused and continue your journey to financial freedom.

And don’t worry so much.

Just believe in your heart that it will work out (while working to ensure that it does).

7. Embrace good financial habits

You can only reach your financial goals when you get rid of your bad financial habits and embrace good financial habits. Believe me when I say that this has to be a conscious decision you take and it may be hard but you have to actively work at it, especially for those bad financial habits that have stuck to you.

Here are a few good financial habits to have:

  • Avoiding debt.
  • Avoiding impulse buying which eventually leads to debt.
  • Building an emergency fund.
  • Tracking your Expenses.
  • Budgeting.
  • Investing small parts of your income as your salary or paycheck comes in (this can be automated with various apps)
  • Building Various Sources of income.
  • Identifying and getting rid of your bad financial habits.

Final Thoughts on Setting SMART Financial Goals

It’s impossible to be financially free and secure if you don’t have financial goals.

After all, it’s these goals that help you contain your frivolous spending habits.

They also motivate you to be better and pursue a better version of yourself.

So take them seriously and set SMART financial goals today.

Once you’re done with your financial goals, you can complete the other 8 steps in this article I wrote on the 9 Steps for Creating a Reliable Financial Plan.

Please leave a comment if you have any questions, suggestions or you want to share something you’ve discovered that can help others.

Thanks for reading.

Moshope

Moshope Ajiboye is a freelance writer, blogger, and small business owner. She is passionate about writing, financial freedom, learning, and becoming a better person. You can find her on Twitter and Instagram with the same handle: @ajiboyemoshope. She also has a Youtube channel called Pursue Better Me.

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