What are Financial Goals?

Your personal big-picture objectives that you set for how you will save and spend money are your Financial Goals.

A financial goal may have a short-, medium- or long-term aim, such as saving for a vacation to planning for a comfortable retirement, respectively.

Understanding and setting financial goals is fundamental for financial health, regardless of your age. Whether you are a 19-year-old college student starting to think about your financial future or a parent managing a budget, having a clear financial goal in place is key to navigating the complexities of personal finance effectively.

When you are creating a budget, you should first create a list of your financial goals. When you know what you are aiming for, it is easier to work towards your money goals.

Nerdwallet.com says the following about financial goals:

“Financial goals are the personal, big-picture objectives you set for how you’ll save and spend money. They can be things you hope to achieve in the short term or further down the road. Either way, it’s often easier to reach your goals if you identify them in advance.”

A goal gives you a target to work towards

Setting goals helps you focus on what matters most to you. You need to decide what you want your money to do for you.

For some people, securing their family’s future is paramount, for others, it is buying a home. Some goals may be unusual or eccentric, such as traveling the world, collecting rare artworks, or even funding a private expedition to Antarctica.

Goals give you direction and something to work towards. When you have a goal in mind, it is easier to make tough financial decisions.

A man and woman practicing archery plus a definition of Financial Goals.
Image created by Market Business News.

Types of financial goals

There are three main types of financial goals: short-, medium-, and long-term:

  • Short-term

These are goals that you would like to achieve within twelve to twenty-four months. Examples include saving for a vacation abroad, paying off a small debt, or trading in your car for a better one.

  • Medium-term

Medium-term goals may take from three to ten years to achieve. Examples include saving for a down payment (deposit) on a house, paying off larger debts, funding a significant home renovation, or starting a business.

  • Long-term

These goals focus on the distant future – decades away. You may be saving for your baby’s college education, retirement, building a substantial investment portfolio, or leaving a legacy through charitable giving.

How to set financial goals

Below are some tips for setting your financial goals:

  • Have a clear vision

Make sure that you start with a clear vision. What matters the most to you? This could be home ownership, travel, education, or financial security.

  • Be specific

Don’t think in general terms. Rather than saying “I want to save money,” specify how much, why, and for how long.

  • Make it measurable

Your targets must be well-defined, with specific timelines. Having a target of $10,000 to save within 24 months for a down payment is more actionable than a vague desire to save some money.

  • Be realistic

Do not set overambitious targets; they must be achievable. Your goals should require some effort, but they must remain possible within your financial constraints.

  • Be relevant

If you set goals because you think you should, you are less likely to achieve them. They must be truly important to you.

Manageable steps

If the idea of setting and achieving financial goals seems daunting, break them down into smaller, more manageable steps.

There are many tools available today that can make complex information easier to understand. Online courses, financial calculators, and some apps can be great aids.

Conclusion

Setting financial goals is about defining your aspirations and taking control of your financial future. Set clear, specific, and realistic objectives.

Whether you are saving for something you would like to acquire next year or planning for your retirement, remember that every journey starts with a single step.