Balancing your financial goals amidst existing debts can be tough. Whether it’s student loans, credit cards, or other debt, a significant portion of your income might be allocated toward repayment, leaving minimal funds for savings. Reaching your financial goals takes planning and setting financial goals is a key component to attain financial freedom. Each individual’s personal financial goals are different from another. You can do that on your own or get help from a financial advisor or accountant. Whichever you choose, you need a SMART (Specific, Measurable, Achievable, Relevant and Timely) strategy.

What are Financial Goals?

Financial goals are the personal, big-picture targets you set for how you’ll save and spend money. In other words, they are financial objectives that an individual wishes to accomplish within a certain time frame. For example, it could be setting up a fund for their children’s education, travel, emergency, health care, etc. Financial goal planning is important as it is key to personal financial growth. They help maintain discipline in investment and help individuals accomplish life goals systematically.

What Constitutes a Good Financial Goal?

A good financial goal can be divided into short-term, middle-term and long-term objectives. Here are some examples of financial goals you can apply to your life:

• Pay off your student loan fee in 2 years
• Save for a down payment on a home
• Paying extra monthly payments or annual lump sum amount to payoff your mortgage quickly
• Saving $1,000 each month for emergency funds
• Settling high interest credit card debts
• Save for your dream retirement
• Save for your kid’s college funds

How to Set Financial Goals?

One way to set your financial goals is to use “SMART” (Specific, Measurable, Achievable, Relevant and Timely) goals. Write out specific goals you have, prioritize them, and then go through all the SMART factors. For retirement, have a specific age you want to retire at and a measurable amount of funds that you want to have available at that age. Make sure the goal is realistic and achievable. Make it relevant and be sure you have a set plan to achieve that goal in a specific timeframe.

Consider working through these five steps to set your financial goals. 

1. Review your finances

To set financial goals, you need to figure out how much you can afford to save for each goal given your current spending levels. Preparing a balance sheet will give you a better idea of your financial situation and help you see where you stand.

2. List and prioritize your financial goals

Write down your financial goals and divide them into short-term, medium-term and long-term objectives. Start with some short-term goals. These keep you motivated because you will reap benefits sooner. You also need medium term goals as well — things like a vacation or new gadget. Then there are the long-term goals — buying a house or a car, or the real big one — having enough money to retire.

3. Set a target date for your financial goals

Always put a target date for your financial goals so you can actively work towards it even if you have to adjust the date over time.

4. Monitor your progress

To stay on track with your goals, record your progress in a journal, ledger, spreadsheet or personal finance app. This can help you adjust your income and expenses as needed.

5. Revisit your goals

Once you learn how to identify financial goals and have your plan in place, keep in mind that your framework will evolve over time. Life changes and other factors can affect your financial goals. It’s important to review your goals at least once a year to adjust expectations, chart your progress and review your priorities.  

Bottom line

It can feel like there’s a lot of pressure to set new financial goals and actually achieve and maintain them. Start by reviewing your budget so you can set goals that are doable for your circumstances. This way, you can make small shifts that are both progressive and impactful while still preparing for financial surprises that may pop up. It’s not always easy, and can sometimes even be emotional, but the pay off can be very worthwhile.

DM Tax provides a full range of accounting services. If you’d like to discuss your financial goals, please schedule a consultation. We’d be happy to help.