How to Set Financial Goals

1. Reflect on Your Finances

Before you set any specific goals, it's a good idea to think broadly about the current state of your finances and where you'd like to end up. Take this opportunity to acknowledge what's working now, as well as to note down any points of stress or areas for improvement.

Conduct a Financial Audit

Here are some things to consider as you assess your financial life:

• How is your cash flow? Look over your bank and credit card statements to see if you're spending less than you earn. You should ask yourself whether you're living paycheck to paycheck, and whether you're able to comfortably afford your expenses.
• Are you budgeting? If not, note this as a potential goal (more on this below). If you already have a budget, are you sticking to your spending plan?
• Are you making on-time bill payments? Paying your monthly bills on time helps you steer clear of late fees and avoid damage to your credit.
• Are you carrying debt? If so, note your balances, interest rates and due dates. This will help you prioritize payments when you set your goals.
• Do you have savings? If you do, note your balances and reflect on how your savings are working for you. Are you saving for an emergency, or a different goal? Are you earning interest on your savings?
• How do you feel about your finances? Everyone's relationship with money is personal, and becoming more confident about your money starts with knowing how you feel now. Try jotting down a couple words to describe your attitude about money; for example, you might feel "optimistic" or "anxious."

Nail Down Your Motivation

Beyond helping you set concrete goals, reflecting on your financial situation can also help you identify your why. Knowing why improving your finances matters to you can help you stay motivated, which is essential for sticking with it when you run into obstacles down the line.

For example, you may want to improve your finances because you want to start a family or travel more. Or, you may feel motivated to save because you hope to reach financial independence in retirement. You may also want to set goals as a way to improve your financial wellness because you're envisioning a life with less stress about money.

2. Start With Short-Term Goals

It's important to find a balance between long-term and short-term financial goals. You can consider anything that you want to accomplish in the near future—such as within the next five years—as a short-term goal.

Short-term goals could include things like building an emergency fund or saving up for a vacation next summer. Generally speaking, the best place to put your short-term savings is someplace where you can access the money while still earning some interest. A high-yield saving account, money market account or certificate of deposit could be an option.

Examples of Short-Term Financial Goals

Everyone's finances are different, so it's ultimately up to you to set a timeframe for your goals. Broadly speaking, here are some goals to consider for the short term.

• Make a budget. Creating a budget should be one of your first financial goals, because a budget will help you avoid overspending and set aside funds toward your other goals. Consider starting with a 50/30/20 budget, which is flexible and well-suited to beginners. It recommends allocating 50% of your income to necessities such as rent and utility payments, 30% to wants such as entertainment and travel, and at least 20% to savings and debt payments.
• Create an emergency fund. An emergency fund is money you set aside to cover yourself in the event of a reduction in income or a large unexpected expense. Experts suggest setting aside between three and six months' worth of basic expenses for emergencies. You could start by aiming for one month's expenses, then go from there.
• Improve your credit. While building credit can be a long-term goal, there are likely steps you could take right now to see improvements. For example, paying down a credit card balance or making on-time payments may lead to a boost in your score relatively quickly or steadily over time, depending on your credit history.

3. Create Long-Term Goals

Long-term financial goals are anything that you expect will take you more than five years to accomplish. For example, saving for your kids' college education could be a long-term goal.

When it comes to long-term savings goals, your lengthened timeline gives you more opportunity to benefit from exposure to market growth and potentially earn higher rates of return. Opening an investment account for your long-term savings can help you grow more wealth.

Some financial goals may fall somewhere in the middle of the spectrum. For example, the 2024 Millennials' Financial Milestones study from the Certified Financial Planner (CFP) Board found that achieving career fulfillment is a high-priority goal for Americans ages 25 to 44. Career fulfillment can be a long-term goal encompassing years of education and promotions. Or, you could think of finding a more fulfilling job as a goal you want to accomplish this year.

Examples of Long-Term Financial Goals

• Save for retirement. Nearly half of respondents to the CFP Board's Millennials' Financial Milestone survey cited funding a retirement account as a top goal. Retirement planning is one of the longest-term financial goals you can pursue, but you can check off some first steps right away. For example, estimate how much you'll need to retire and set up automatic contributions to a workplace 401(k) plan or an individual retirement account (IRA).
• Buy a home. Homeownership is a major milestone, and it comes with opportunities to build long-term wealth through equity. But buying a home can take years of saving. The median price of homes sold in the third quarter of 2024 was $420,400, according to the U.S. Census Bureau. At that price, you'd need to save at least $84,080 for a 20% down payment. You could start by breaking your down payment goal into smaller, yearly goals and researching local down payment assistance programs.
• Pay off student debt. The average student loan balance was $37,797 in 2024, according to Experian data. Whatever your balance, it could take some long-term planning, plus use of resources such as income-driven repayment, loan forgiveness or refinancing, to tackle your debt over time.

4. Make Your Goals SMART

In the realm of goal-setting, the SMART acronym stands for:

• Specific: What exactly do you want to achieve?
• Measureable: How will you know you're on track (or, on the other hand, falling short)?
• Achievable: What tangible steps can you take to achieve your goal?
• Realistic: Is the goal something you can realistically achieve, taking into account your personal financial situation?
• Timely: What is the timeline for your goal? For larger goals, what shorter benchmarks can you set?

SMART Financial Goal Example

Consider the goal of creating an emergency fund. To turn it into a SMART goal, break it down into the five elements:

• Specific: Say you want to save three months of essential expenses for an emergency. If your basic expenses come out to $2,000 a month, a specific goal is "I want to save $6,000 in an emergency fund."
• Measureable: How will you measure your progress toward your goal? Set a clear system. For example, you could check your savings account each week to ensure your balance is growing.
• Achievable: One of the best ways to make a savings goal achievable is by setting up automatic transfers. For example, "I will make my goal achievable by transferring 10% of each paycheck directly into a high-yield savings account."
• Realistic: To keep your savings goal realistic, look at your income and expenses to decide how much you can afford to set aside. Then, commit to what you know you can achieve. "I will keep my goal realistic by paying myself first and budgeting to avoid eating into savings."
• Timely: Set a timeline for your goal. For example, "I will save $6,000 in a year by setting aside $500 a month, or $250 from each paycheck." Remember to adjust your timeline (or target) as needed to keep the goal realistic.

Try turning all your financial goals into SMART goals to set yourself up for success.

Learn more >> How to Set SMART Financial Goals

5. Track Your Progress

After you've laid out your goals, come up with a system for tracking your progress. For example, depending on your goals, you could track your goals by:

• Using banking or brokerage apps to help you track increases to your net worth over time
• Downloading a budgeting app to track your spending and ensure you're sticking to your budget
• Signing up for free credit monitoring through Experian to watch your credit management habits pay off

The Bottom Line

The key to sticking with your financial goals is to strike a balance between commitment and flexibility. In other words, stay focused on your long-term vision, but be prepared to pivot as needed. You may need to adjust your goals as you experience life changes, such as career changes, a growing family or other shifting priorities. If you want individualized help setting goals, consider working with a financial planner to review your personal money situation.