How To Set Financial Goals

Financial goals are how you intend to manage your money, from saving to spending. These goals help you focus on what’s important to you and keep you accountable for your choices. You can set financial goals for the short term, long term, or anything in between.

For the best result, any financial goal you set should be SMART. And we don’t just mean clever, we mean S.M.A.R.T.

SMART goals are:

• S – Specific: define your goal in relation to the outcome you’re trying to achieve, e.g. save $10,000 for an emergency fund in one year.

• M – Measurable: quantify your goal so you can track your progress., e.g. to reach my emergency fund goal I need to save $200 a week. ($200 x 52 is $10,400).

• A – Achievable: your goal should be realistic with clear steps you can take to achieve it, e.g. I will save $200 a week by cutting down on takeaways, dining out and discretionary spending.

• R – Relevant: your goal should be important to you and align with your values, e.g. I need a financial buffer for times when life doesn’t go to plan.

• T – Time-bound: your goal should have a deadline, e.g. I will save $10000 in a year.

Wondering how to set savings goals or other financial goals? Let’s look at the steps you can take to make a change and supercharge your finances.

1. Write your goal down

Just thinking about a goal isn’t going to make it happen.

2. Make it a SMART goal

Take a look at your goal and answer these questions:

• Specific – what am I trying to achieve?

• Measurable – what does success look like?

• Achievable – how will I achieve my goal?

• Relevant – why will I achieve my goal?

• Time-bound – when will I achieve my goal?

3. Break it down into steps

Every goal needs an action plan. When it comes to the actions you need to take, get really specific. For example, if you want to save $200 a week for your emergency fund, put together a plan so you know where that money will come from, e.g. I’ll spend $25 less on coffee a week, $100 less on takeaway and $75 less on drinks.

Once you’ve got a great plan, decide how you’ll track your savings. Will you set up a weekly automatic transfer to a savings account or will you use a Round Up app?

4. Take action
Now that you know exactly what you need to do to achieve your goal, it’s time to do it. And with a plan, it should be easier.

5. Track your progress

Lastly, set a reminder to track your progress. Watching your savings rise is a great indicator that you’re achieving your goal. Use this as motivation to keep going! Set savings targets, e.g $500, $1000, $5000, $7500 and $10000, and when you smash each of them reward yourself for a job well done.

Short term financial goals are those goals you want to complete soon. They usually involve a small change that will have an immediate impact, e.g consolidating your debt or super. Working on your short term financial goals can be a good way to get you thinking about your finances and feel good about taking charge of your money. And that can motivate you to set and achieve more goals.

Long term financial goals are those goals that you need to plan to achieve some time in the future. They can also involve a small change, but you likely won’t see big results for a period of time, e.g investing in the shares or saving for a home deposit. But the good thing about long term goals is that a little goes a long way – simple actions today can have a big impact on your future. And they’re important because if you don’t think about them now, they can be a lot harder to achieve down the track.

Stuck for ideas about how to improve your finances? You might like to think about these common financial goals.

Short term financial goals:

• Create and stick to a budget.

• Reduce your debt by paying off a credit card or consolidating to a low interest loan.

• Set up an emergency fund.

• Spend less and save more.

• Take out the insurance policies you need for a secure financial future e.g. income protection.

Medium to long term financial goals:

• Pay off your big loans, such as student debt or mortgage.

• Set up an education fund for your children.

• Save for your dreams e.g. home improvement or an extended holiday.

• Boost superannuation for your retirement.

• Invest in the share market or property

Your financial goal list

You can work towards more than one financial goal at the same time. Your financial goals should ideally be a mix of shorter and longer term goals. Then you can rest easy knowing that your finances are in shape today, while knowing that tomorrow is taken care of.

Prioritise your goals, as you might not be able to achieve them all at once.

Here’s the good part. Once you have set a SMART financial goal with a plan for how to achieve it, all you have to do is follow that plan (and track your results), and the rest could take care of itself. And if your circumstances change and the plan is no longer working for you, simply revisit your goals and adjust as necessary.

Why should I set financial goals?

Financial goals help you focus on what’s important to you and allow you to choose where your money goes. They can help you feel more secure (knowing you have enough money to live now and in the future) and more satisfied (knowing that you have a plan to afford what you want). You can set financial goals for the short term, long term, or anything in between, and they can make a big difference to your bottom line both today and tomorrow.

How many financial goals should I set?

The number of financial goals you have depends on your personal circumstances. Your financial goals should ideally be a mix of shorter and longer term goals. Working on a short term financial goal to begin with can be a good way to get you thinking about your finances and feel good about taking charge of your money. Achieving one of your goals can motivate you to set and achieve more. Prioritise your goals, as you might not be able to achieve them all at once.

Is a savings goal a financial goal?

A savings goal is a type of financial goal. Financial goals can also relate to your debt, spending, investments and other financial choices.

What is a SMART financial goal?

A SMART financial goal is an acronym. It stands for:

• S – Specific: define your goal in relation to the outcome you’re trying to achieve, e.g. save $10000 for an emergency fund in one year.

• M – Measurable: quantify your goal so you can track your progress, e.g. to reach my emergency fund goal I need to save $200 a week. ($200 x 52 is $10,400).

• A – Achievable: your goal should be realistic with clear steps you can take to achieve it, e.g. I will save $200 a week by cutting down on takeaways, dining out and discretionary spending.

• R – Relevant: your goal should be important to you and align with your values, e.g. I need a financial buffer for times when life doesn’t go to plan.

• T – Time-bound: your goal should have a deadline, e.g. I will save $10000 in a year.