How to Set and Reach Your Financial Goals
A goal is a wish your heart makes . . . when you’re wide awake and ready to start getting life done.
Part of being an adult is realizing there’s no fairy “goal-mother” with magic dust who makes wishes come true—which is good, because it also means your dreams won’t turn into pumpkins at midnight. But it’s also bad, because it means you’ll have to work for them.
What are financial goals?
You’ve probably thought about other life goals: getting fit or healthy, becoming more intentional with your time, or learning a new skill. But what about money goals?
Think of where you want to be—financially—in the next five, 10 and 20 years. What about next year? Thinking about the big and small things is what you have to do when you’re writing out your goals.
And writing out you must. Goals are actionable dreams. So the first action step is to write them down. When you put goals into words and keep them in front of your face as both a reminder and a motivation, you’re beginning to bring them to life. So give them breath. Write them down.
How do you choose your financial goals?
But wait. How do you choose which goals to make your own? Where do you start? Start here—with our list of 10 financial goals. Read through and think about which ones best connect to your life and your dreams.
10 Popular Financial Goals
1. Create and stick to a budget.
When you get serious about your finances, you have to start seriously budgeting. Not only is this one of the top 10 financial goals people set each new year, it’s also the foundational goal on which all others should be built. If you aren’t budgeting—setting up a plan for all the money coming in and going out—you can’t gain momentum with your other money goals.
2. Build up an emergency fund.
Life happens. But you can be prepared for any money problems that come your way if you’ve got money saved up. When you have an emergency fund, you can rest well at night knowing you’re able to stand up against a financial threat without being beaten. You aren’t living paycheck to paycheck; you’re living with confidence. Those good vibes are better than any memory-foam, lavender-scented, lullaby-playing pillow out there.
3. Get out of debt.
“What is debt? Baby don’t hurt me; don’t hurt me—no more.”
This early ‘90s pop-dance tune reference is your friendly musical reminder that “debt hurts, debt scars, debt wounds and mars.” (That one’s from the ‘70s.) We’d parody any song out there if it meant encouraging people to pay off and then avoid debt. But we aren’t the only ones singing the praises of that debt-free lifestyle. Getting out of debt is a trending financial goal. And though many are still living on credit cards and taking out car and student loans, more and more people are realizing how much “debt stinks (yeah yeah).” (You knew we couldn’t leave out the ‘80s.)
4. Live on less than you earn.
The best way to get ahead is to stop getting behind. It’s not poetry. It’s not science. It’s common sense.
Getting ahead with your money is within your reach, but that calls for living on less than you earn. So what does that mean and how do you get there? It means more money comes in than goes out. Then you’re able to put some into savings and investments and start thinking ahead. (See how it’s all forward?) You also get there by becoming more intentional about your spending. Budget every month, find deals, use coupons, save to pay cash, and—super importantly—learn to say no, at least sometimes, to stuff that costs money.
And the easiest way to make sure you’re not spending more than you make is to create a plan for your money and stick to it—aka a budget. It’s easy to see why this one’s on a list of important financial goals. Spend less, and you’ll accelerate all your money goals.
5. Travel more.
Not all money goals are serious and stuffy. Some look really good on Instagram—like biking the streets of Amsterdam or eating croissants and taking selfies in front of the Arc de Triomphe in Paris. Is traveling one of your top money goals? Maybe you don’t want stuff as much as you want experiences, or maybe you’ve just always had the travel bug. Either way, start a sinking fund for the trip of your dreams, and you can make it come true—maybe even sooner than you think!
6. Save money to pay cash for big items.
Not only should you cash-flow travel, but you should also cash-flow big purchases. Cars, furniture, technology—these things cost money. Having dollar bills in hand to pay for these items—in full—is a fabulous financial goal. This puts you in the driver’s seat, steering yourself toward owning things rather than owing for things.
7. Stop living paycheck to paycheck.
Seventy-eight percent of Americans live paycheck to paycheck.(1) What’s that? Living paycheck to paycheck refers to a financial lifestyle with the stability of a parachute made of dandelion fluff. It means money in, money out: Each month pays only that month’s bills with no look to the future because you just can’t yet.
Hearing it broken down like that shows why people would want to end the paycheck-to-paycheck cycle. It’s a great financial goal to aim for! It means budgeting, as well as spending less and saving more. But it’s possible. Seriously. So consider taking this goal on and finding security like you’ve never known.
8. Pay off your home.
There’s no place like home. It’s where you sleep and eat and hang your heart. Also, it’s usually the largest expense in your budget. We specifically recommend 25% or less of your take-home pay. Imagine getting 25% of your income back to spread out over your savings account, travel fund, favorite charity, home-improvement bucket list, woodland-creature whittling hobby, and retirement account. That’s what happens when you pay off your mortgage. And that’s why this is a fantastic goal. The work is hard, but the payoff is immense.
9. Save up funds to help your children pay for college.
One of the greatest financial myths of today is that college isn’t possible without some debt attached. And it’s a doozy of an expensive myth at that. We disagree! Prospective students should go on intense scholarship and grant hunts, writing all the essays and filling out countless applications. And they should always consider in-state and community college options and—by golly—work throughout school to pay for tuition and fees.
We know parents often think about their kids one day dawning the doors of a great university—and they want to help pay for it. If you’re in this boat, know that navigating the waters of college savings funds isn’t as stormy a task as you may fear. Don’t feel pressured to make or meet this money goal, but if you’re financially able, helping your children pay for college would be an incredible blessing to give them.
10. Live your retirement dreams.
As you imagine your golden years, what do you see? Do you want to pack up an RV and see all of America? Do you want to read every book on your shelves you’ve been intending to for your entire professional life? Do you want to invest more time woodland-creature whittling? (Yes, we referenced it again. It’s a lost art.)
No matter what you envision this future looking like, you’re going to need money to make it happen. When you stop working, your income goes away. So having a financial goal in place to replace that paycheck with retirement investments is not only nice—it’s necessary!
Why is it important to set financial goals?
If you don’t set goals, things won’t change. You’ll stay right where you are—in the land of wishful thinking. And while that’s a fun place to have some thought vacations, it’s no place to live.
Financial goals give a voice and direction to your dreams. They give them shape, activity and life. Don’t kill your dreams. Instead, set financial goals.
How can you make it happen?
Write out your goals.
You won’t do them if you don’t write them, speak them, see them. So do it. NOW.
Find someone you trust to talk through your goals with. This needs to be someone who can give you a reality check and encouragement along the way—someone who’ll check in on your progress and cheer on your accomplishments. Having accountability means you don’t leave your dreams on your own shoulders; you pick someone to help you carry the load.
Follow a solid plan.
If you look over that list of 10 financial goals, you might feel a little overwhelmed. Where do you start? What comes next when you decide you’re ready to make your money goal a reality?
We use what’s called the 7 Baby Steps as our guide in this situation. Walking this financial journey all the way to retirement is a long and winding road so you should take one (baby) step at a time. (See, that’s where the term came from!)
For a budgeting app, we sure talk about budgets a lot. Funny how that works. But is this a chicken-and-egg situation? Do we acknowledge the power of budgets because we’re a budgeting app, or are we a budgeting app because we acknowledge the power of budgets? It’s both.
Don’t spend too much time worrying over which came first. Instead, sing this to the tune of Michael Jackson’s “Beat It” and feel inspired to log in to EveryDollar: “Budget. Budget. Then your dreams won’t be defeated. . . just budget. Just budget.”
Track your expenses.
No budget works if you set it up and leave it alone. That’s like adopting a puppy, buying it a fluffy bed, telling it not to chew up your shoes, and then leaving for work. That puppy’s going to chew up your shoes. And the rest of your house. It’s what untrained puppies do.
Once you’ve set up your budget, you still have to be attentive to your spending by tracking your expenses, which is super-duper easy when you have EveryDollar Plus. It connects to your bank account and streams your transactions right to the app. You just drag and drop them to their appropriate budget line.
Keep your shoes unchewed and your spending in check. Train your puppies and track your expenses.
Become more self-aware.
While you’re trying to make these financial goals a reality, remember that your greatest cheerleader and opponent, hero and villain is . . . you. Socrates once said, “Know thyself.” Anyone who rocks both a toga and a ringlet beard must be pretty self-aware and self-secure. So in this case, listen to Socrates.
Know your money weaknesses and set up a plan to avoid or overcome them. Know your money strengths and build on them as you celebrate every victory (big and small). Plus, being more self-aware is one of the top keys to crushing any goal.
Reevaluate your goals every now and then.
Life changes. People change. Goals can change. That’s okay. Don’t abandon a goal just because it’s going to mean hard work. But don’t hold on to an outdated goal just because you don’t want to feel like a failure. Accepting that you’re heading in a different direction than you once thought isn’t failure. It’s actually healthy!
Reevaluate your money goals every year, every six months—and maybe every month if you’re into it. Never be afraid to make changes so these goals better suit where you are and where you’re going.
Goal diggers, you’ve got this. Seriously. Whether it’s a new year, a new month, or a random day and you’re feeling motivated to change—you’ve got this. Be intentional and get ready to work on making your dreams come true.
EveryDollar’s here for you today and every day along the way. Start with a wish. Write a goal. Make a budget. And live your dreams.