Setting Financial Goals

A financial goal is a target or objective for what you want to do with your money. Some examples
might be reducing debt, setting aside money for a trip, or saving enough money to retire.  Some people feel that financial goals are only for people with a lot of spare cash. But financial goals help people at all stages of their lives. When you define your financial goals, you take a step toward achieving them.

Setting financial goals provides several benefits, including:

• Stating a clear goal gives you motivation and confidence.
• It helps you stay focused on your objective and on the path to reach your goal.
• A clear goal lets you assess options and alternatives to determine the best way to reach your objectives.
• A clear goal lets you track your progress and make corrections.
• Stating your goals lets you share them with professional advisors and others.

When setting financial goals, it is also important to prioritize your goals, as no one can do everything they would like to. Do you want to buy a home within the next five years? Or buy a car at the end of this year? Do you wish to pay off student debt? Or set aside money for your children’s education? You have to decide what goals are most important and make them your financial priorities. Perhaps you will allocate some money to each important goal. Or you may decide to focus on one goal and defer others until later.

Financial Tip

Establishing S.M.A.R.T. Goals

How do you set financial goals? If you simply make a wish list in your head, they may not make it past the dreaming stage. It is important to make sure your goals are S.M.A.R.T. goals. S.M.A.R.T. goals are a popular tool used in many areas, including personal finance, to help individuals set clear, actionable, and attainable objectives. The acronym S.M.A.R.T. stands for:

• Specific – A specific goal clearly defines what you want to achieve. In the context of personal finance, this could mean stating a precise amount of money you want to save, the debt you want to pay off, or the income you want to earn.
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• Measurable – A measurable goal allows you to track your progress. This could involve setting intermediate milestones or using tools and apps to track your savings or debt reduction.
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• Achievable – An achievable goal is realistic and attainable, given your current resources and constraints. For example, if you’re living paycheck to paycheck, a goal to save a million dollars in a year would likely be unrealistic.
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• Relevant – A relevant goal aligns with your broader life goals and values. In personal finance, this could mean setting financial goals that help you achieve things that are important to you, such as buying a home, retiring comfortably, or being able to afford to travel.
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• Time-Bound – A time-bound goal has a clear timeframe by which you plan to achieve it. This helps provide motivation and allows you to measure your progress over time. For example, you might set a goal to save $10,000 for a down payment on a house within the next two years.

Applying the S.M.A.R.T. framework to personal finance can help individuals improve their financial situation. By setting S.M.A.R.T. financial goals, individuals can create a clear, structured plan for managing their money, which can ultimately help them achieve financial stability and security.

Check Your Progress

Once you’ve set your goals, check in regularly so that you stay on track. Regularly checking your progress keeps you informed about where you stand relative to your objectives and allows you to make necessary adjustments promptly. For instance, if you are not saving enough to reach your goal of building an emergency fund within a specified timeframe, early detection of this shortfall will enable you to make changes such as increasing your savings rate or adjusting your spending habits. Regular tracking also fosters accountability and motivation, as seeing progress can be a powerful incentive to maintain good financial habits. Moreover, it allows you to celebrate small wins along the way, which can reinforce positive behaviors and make the journey toward financial stability less daunting. In short, regularly checking your progress is a fundamental practice that keeps your financial plan dynamic, responsive, and ultimately, successful. ^[1]

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