How to Create Better Financial Goals

Setting financial goals is one of the most important parts of managing your money! When you set financial goals, you create a realistic plan for how to spend your money, prioritize spending, track your progress, and stay accountable for achieving them. In today’s post, we are talking all about how to create financial goals.

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Step #1: Identify Your Values

In a nutshell, your values are what are most important in your life. They are belief systems that guide, influence, and motivate your decisions each day.

Common values are happiness, security, freedom, family, friends, adventure, independence, health, and love.

When it comes to managing your personal finances, it’s important to note that money is a tool to help you live by your core values. Once you’ve determined your core values, you can use them to inform and motivate your goals!

Step #2: Use Your Values to Set Financial Goals

Goals and values, while related, can be easy to confuse.

The difference between the two of them is that a value tells us how you want to live your life, and a goal is an objective that is based on your values.

Let’s say, for example, that someone has the core value of “freedom.” That might mean they have the financial goal of paying off their student loans so they aren’t tied down to a debt payment each month.

Another example is if someone has the core value of “adventure,” they might have the financial goal of creating a sinking fund for their next vacation.

Other common financial goals include…

Building a 3-6 month emergency fund
Saving for the down payment on a house
Cash-flowing their wedding
Planning for retirement

When your financial goals are tied to your core values, you are so much more likely to achieve them!

Step #3: Examine Your Financial Status

Now that you have created values-based financial goals, it’s time to examine your finances!

Take a look at your budget and determine how much money you have available to allocate towards your goals each month. Depending how much discretionary money you have to work with, you may need to prioritize your goals in order of importance and/or urgency.

If you don’t have a budget, check out this post to learn how to start one!

Step #4: Set SMART Financial Goals

When setting financial goals, you want to make sure that they are Smart, Measurable, Achievable, Relevant, and Time-Bound.

Specific

Be as specific as possible when thinking about what you want to accomplish.

Instead of making a vague statement of “I want to pay off my debt,” make the goal more specific by saying “I want to pay off my student loans by December 2022.”

Measurable

Lucky for you, money is a GREAT metric to use when measuring your progress ;)

If the goal might take a few months or more to achieve, set financial milestones that you can check off along the way.

If we continue with our student loans example, this might look like…

25% paid off by June 2021
50% paid off by December 2021
75% paid off my June 2022
100% paid off by December 2022

Achievable

You want to make sure that your goal is achievable so that you don’t get discouraged and give up. You will be so much more likely to stay motivated to complete an achievable goal.

Think about the money that is required to achieve your goal.

If you want to pay off $50,000 of student loans in 24 months but only make $30,000 a year, you might want to reassess your timeframe. To make this goal more achievable, you might want to change the time frame from 24 months to 84 months (assuming that your income is not projected to increase during that time).

Relevant

The relevance of a financial goal refers to how it aligns with your core values and situation.

If you absolutely hate traveling and adventure is not one of your core values, then the goal of saving for your next vacation probably doesn’t make the most sense.

Time-Bound

Like we mentioned when discussing “achievable” goals, an unrealistic timeline will probably mean that you won’t achieve your goal.

On the other hand, a realistic timeline can help you stay motivated and accountable to achieve it!

Step #4: Create A Vision Board

Now that you have SMART goals, it’s time to create a Vision Board to help you stay motivated!

A vision board helps you visualize the process and outcome of achieving your financial goals. The more vividly you visualize your goals, the more likely you are to achieve them.

My debt free vision board is nothing fancy--just a memo board showing the progress that I’m making on my debt free journey. But you can make your vision board as detailed as you want it to be.

Step #5: Celebrate Small Victories

Regardless of what your financial goal is, it’s probably going to take a lot of work and effort to achieve.

While you are making progress towards your goals, remember to take time to celebrate small victories along the way.

If you hit a milestone on your financial journey, reward yourself for it! This could mean going out to dinner with your friends, baking your favorite recipe, or treating yourself to an item of clothing from your favorite store.

Whatever it is, make sure to set aside resources to celebrate your progress and hard work.

Final Thoughts

Creating financial goals allows you to make a plan for your money, spending, and future. If you follow these steps, you will be so much more likely to to actually achieve the goals you have set for yourself!

What financial goals are you setting this year? Share in the comments below.

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