Setting and achieving financial goals is one of the most important steps to securing your financial future. Whether you want to build savings, pay off debt, or invest for retirement, having clear, actionable goals is the key to success. I know firsthand how overwhelming it can feel to balance everything, but with the right plan, it’s totally doable. In this guide, I’ll walk you through how to set financial goals that are realistic and achievable, so you can stay on track to meet your money milestones.
Step 1: Assess Your Current Financial Situation
Before you can set financial goals, it’s essential to get a clear picture of where you currently stand. I know this step might feel a little daunting, but trust me, understanding your financial situation is the foundation for creating a plan that works. Here’s how I approach it:
Income vs. Expenses
Start by tracking all your sources of income—this includes your regular salary, side hustles, or any passive income. Then, take a deep dive into your expenses. Break them down into categories like housing, groceries, transportation, entertainment, etc.
Evaluate Your Savings
Next, look at how much you’ve saved so far. I always recommend having at least a three-month emergency fund in place, but if you’re just getting started, that’s okay. Take stock of your savings accounts, retirement accounts, and any investment portfolios you have.
Review Your Debt
Now, let’s talk about debt. List out all your debts, including credit cards, student loans, car loans, and mortgages. Don’t forget to include the interest rates on each, as this will help you decide which debts to prioritize paying off first. Understanding your debt load will give you a clearer picture of how much of your income is being used for repayments.
Know Your Net Worth
Finally, it’s important to know your overall net worth. Subtract your liabilities (debt) from your assets (savings, investments, property, etc.). This number may surprise you, but it’s a crucial benchmark. It helps you measure your financial health and track your progress as you work towards your goals.
Once you’ve assessed your current financial situation, you’ll have a much clearer idea of where to start setting goals. Understanding where you are now will help you map out the steps to get where you want to be!
Step 2: Define SMART Financial Goals
Once you’ve assessed your financial situation, it’s time to start setting your goals. But not just any goals—SMART goals. Using the SMART framework has helped me stay focused and realistic when planning my financial future, and I think it’ll do the same for you. Here’s how it works:
Specific
The first step is making your goal specific. Vague goals like “save more money” or “pay off debt” are tough to track. Instead, get clear about exactly what you want to achieve. For example, rather than saying “save more money,” try something like “save $10,000 for an emergency fund.” Having a specific target gives you a clear destination to work toward.
Measurable
Next, your goal should be measurable. This allows you to track progress and see how close you are to reaching your target. For instance, if your goal is to save $10,000, break it down into monthly or weekly targets. Being able to measure progress keeps you motivated and ensures you stay on track.
Achievable
While I’m all for dreaming big, it’s important to set goals that are realistic and achievable based on your current financial situation. If saving $10,000 in six months feels too ambitious, extend the timeframe to 12 months. The key is to challenge yourself without setting yourself up for failure.
Relevant
Your goals should be aligned with your overall life and financial priorities. Ask yourself: Why is this goal important to me? If paying off credit card debt will free up income to put toward your retirement fund, then it’s relevant to your long-term financial success. Keeping your goals relevant ensures that every step you take is helping you achieve your bigger financial dreams.
Time-bound
Finally, give your goals a deadline. A goal without a timeline is just a wish. Setting a time-bound goal like “save $10,000 by December 31” adds a sense of urgency and accountability. Plus, having an end date makes it easier to track your progress and adjust your strategy if needed.
By defining SMART financial goals, you’re giving yourself a roadmap to success. I’ve found that breaking big, vague dreams into smaller, actionable steps makes them much more attainable. Start with one or two SMART goals, and you’ll be amazed at how much progress you can make!
Step 3: Create a Budget That Works for You
Now that you’ve set your SMART financial goals, the next step is creating a budget that works for you. I used to think of budgeting as restrictive, but I’ve since realized it’s the key to gaining control over your money. A good budget isn’t about cutting out everything fun—it’s about making sure your spending aligns with your financial goals. Here’s how I approach it:
Track Your Income and Expenses
The first thing I do when building a budget is list all my sources of income. This includes my main job, any side gigs, and passive income. Then, I track all my expenses—housing, utilities, groceries, transportation, entertainment, and even those sneaky little subscription services. It’s eye-opening to see how much I actually spend on things like takeout!
Set Spending Limits
Once I know where my money is going, I set spending limits for each category. For example, I give myself a set amount for eating out and entertainment each month. This helps me stay within my budget without feeling deprived. The key here is to be realistic—if I know I’ll eat out a few times a week, I plan for it rather than pretending I won’t.
Pay Yourself First
One of the best tips I’ve learned is to pay myself first. This means putting money into savings or toward debt right when I get paid, before I even start spending on other things. Whether it’s a percentage of your paycheck or a set amount, prioritize savings like you would any other bill. The BearSavings Savings Goal Calculator is great for setting targets and tracking how much you need to save each month to hit your goals.
Adjust as Needed
No budget is perfect right away. I check in on mine regularly and make adjustments as life changes. If an unexpected expense comes up or my income fluctuates, I adjust my spending limits accordingly. The important thing is not to get discouraged if you have to make changes—flexibility is key to a budget that actually works.
By creating a budget that works for you, you’ll have a clear roadmap for how to spend, save, and invest your money in a way that aligns with your goals. Trust me, once you start budgeting, it feels incredibly empowering!
Step 4: Build an Emergency Fund
If there’s one financial goal that has given me peace of mind, it’s building an emergency fund. Life is full of surprises—some good, some not so good—and having a safety net can make all the difference when unexpected expenses pop up. I know it can be tough to prioritize saving for emergencies, especially when you’re focused on paying off debt or saving for other goals, but trust me, it’s one of the most important steps you can take toward financial security.
The general rule of thumb is to save enough to cover 3 to 6 months of essential living expenses. This includes things like rent or mortgage payments, utilities, groceries, and insurance.
If you’re just starting out and 3-6 months feels overwhelming, start smaller! I started with a goal of $1,000 as a mini emergency fund, which gave me some breathing room while I worked on saving more. Once I hit that initial milestone, I felt more confident and kept building from there.
One of the easiest ways I found to build my emergency fund was by automating my savings. I set up a separate savings account specifically for emergencies and arranged for a portion of my paycheck to be automatically deposited into that account each month. Even if it’s just $50 or $100 a month, it adds up faster than you think! The key is consistency—treat your emergency fund like a non-negotiable bill. Once you’ve started building your emergency fund, the hardest part might be resisting the urge to dip into it. Trust me, I’ve been tempted! But it’s crucial to only use this money for true emergencies—not vacations, shopping, or even small unexpected expenses like a last-minute dinner out. When in doubt, ask yourself, “Will this affect my ability to live and work?” If the answer is no, keep that fund intact.
Step 5: Prioritize Debt Repayment
Debt can feel like a heavy weight holding you back from reaching your financial goals, which is why paying it off should be a top priority. I’ve dealt with my fair share of debt, and the relief of seeing those balances go down is worth every penny. Here’s how I approach it:
Start by listing all your debts—credit cards, student loans, car loans, and mortgages. Include the interest rates and minimum payments for each. This gives you a clear picture of what you’re dealing with.
I personally prefer the Debt Avalanche method, which focuses on paying off the debt with the highest interest rate first while making minimum payments on the rest. This method saves you more money in the long run. However, if you need a psychological boost, the Debt Snowball method is another option. It focuses on paying off your smallest debt first, giving you quick wins that can help build momentum.
As I worked on paying down my balances, I made a conscious effort to avoid taking on new debt. This meant sticking to a budget and resisting the temptation to rely on credit cards for non-essential purchases.
Step 6: Invest for Your Future
While paying off debt is important, it’s equally crucial to start investing early. Even if you’re tackling debt, setting aside some money for investments can help you build wealth over time. Here’s how I balance both:
If you’re still paying off debt, you don’t need to invest large sums right away. I started by contributing just 5-10% of my income to my retirement accounts. Even small amounts can grow significantly over time thanks to compound interest.
If your employer offers a retirement plan with matching contributions, take advantage of it! This is essentially free money. I always made sure to contribute enough to get the full match before focusing on other investments.
Investing early means giving your money more time to grow. Using a compound interest calculator helped me see just how much even small investments can snowball over time. The earlier you start, the less you’ll have to invest later to reach the same goals.
Once you’re comfortable investing, consider diversifying your portfolio. I didn’t just stick with stocks—I also explored bonds, index funds, and other assets to balance risk and reward. The goal is to create a portfolio that aligns with your long-term financial objectives.
Step 7: Review and Adjust Your Plan Regularly
One thing I’ve learned on my financial journey is that no plan is set in stone. Life changes—whether it’s a job loss, a pay raise, or a surprise expense—and your financial plan needs to adapt along with it. That’s why I make it a habit to regularly review and adjust my financial goals. Let me show you how I stay on top of things without getting overwhelmed.
Set a Regular Check-In Schedule
For me, reviewing my finances isn’t a once-a-year activity. I like to check in on my progress at least once a month. This way, I can spot issues early, like if I’m overspending in a certain category or not saving as much as I planned. Monthly reviews also keep me motivated because I can see how far I’ve come, even in small steps. You can use tools like the BearSavings Budget Calculator or Savings Tracker to make this process easier.
Reassess Your Goals
Sometimes, the goals I set at the beginning of the year don’t make sense anymore. Maybe I’ve reached one goal faster than expected or realized that I need to prioritize something else, like an unexpected home repair. That’s why it’s important to reassess your goals regularly. Are your goals still SMART (Specific, Measurable, Achievable, Relevant, Time-bound)? If not, adjust them! I often revise the timelines on my goals or tweak my savings targets to reflect changes in my income or expenses.
Adjust Your Budget as Needed
Budgeting is never a one-and-done task. When I started budgeting, I realized that life doesn’t always stick to a script. There are months when I spend more on travel or when my utility bills skyrocket in the summer. When that happens, I adjust my budget to accommodate those changes. It’s important to remain flexible and not beat yourself up if things don’t go exactly as planned. For example, if I know I’ll have higher expenses in a particular month, I’ll either reduce spending in other areas or temporarily pause my savings contributions.
Celebrate Wins and Make Improvements
It’s easy to focus on what’s not going right, but I’ve found that celebrating even small financial wins helps me stay motivated. Whether I’ve paid off a chunk of debt or reached a mini-savings goal, I always take a moment to acknowledge my progress. At the same time, I look for areas where I can improve. Maybe I need to cut back on dining out or find ways to increase my income through a side hustle.
Stay Flexible
The most important lesson I’ve learned is to stay flexible. Life rarely goes according to plan, and that’s okay! As long as you’re regularly checking in, reassessing your goals, and adjusting your budget, you’re moving in the right direction. Financial success is a marathon, not a sprint. By staying adaptable, you’ll be better equipped to handle any twists and turns that come your way.
By reviewing and adjusting your financial plan regularly, you’ll not only stay on track but also ensure that your plan remains realistic and aligned with your life. I’ve found this process essential for keeping my financial goals relevant and achievable!
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