Comprehensive financial planning can help you navigate the complexities of managing your day-to-day finances, saving for future financial objectives, and preparing for a well-deserved retirement. Yet the foundation of a successful financial plan lies in setting meaningful financial goals that reflect your unique values, needs, and aspirations.
By establishing clear and realistic objectives, you can create a roadmap that ultimately leads to financial stability and success, so you can focus on what truly matters in life. In this article, we’ll provide a step-by-step guide to setting meaningful financial goals, so you can jumpstart your progress toward financial freedom.
What is a Financial Goal?
A financial goal is a specific, measurable objective that you want to achieve within a certain timeframe. Examples include saving for a down payment on a home, paying off student loan debt, or accumulating the financial resources to retire comfortably.
According to a study by Lincoln Financial Group, 83% of people who set financial goals feel better about their finances one year later. That’s why setting financial goals is an important first step in creating a comprehensive financial plan that guides your decision-making and helps you make smart choices with your money.
Consider the following step-by-step plan for setting meaningful financial goals:
Step 1: Get a Clear Picture of Your Current Financial Circumstances
Effective goal-setting requires a thorough understanding of your current financial circumstances. Once you identify your starting point, you can create a plan that takes you from where you are now to where you want to be.
Start by gathering important financial details and documents, including bank statements, investment account balances, outstanding debts, and monthly expenses. If you don’t currently track your spending, you can do a look-back over the last year or two to better understand where your money goes each month.
This exercise will give you a clearer picture of your current financial habits and well-being. It can also help you identify areas for improvement, which can serve as the basis for setting new goals.
Step 2: Identify Your Short-, Intermediate-, and Long-Term Goals
The next step is to identify your short-, intermediate-, and long-term financial objectives.
Separating your goals into different timeframes can help you allocate your resources more effectively and prioritize what’s most important at each stage of life. It also helps you create a balanced financial plan that addresses both immediate needs and long-term aspirations.
First, list all the financial objectives you want to achieve. Write down whatever comes to mind without judging or censoring yourself.
Next, categorize your goals into short-, intermediate-, and long-term goals. Here’s an abbreviated example of what your final list of goals may look like:
- Short-term financial goals: Pay off high-interest credit card debt and establish an emergency fund.
- Intermediate-term financial goals: Purchase your first home and fund your children’s college education.
- Long-term financial goals. Retire at age 55 and purchase a vacation home.
Step 3: When Setting Financial Goals, Make Them SMART
Numerous studies have shown that setting high, specific goals is more likely to increase performance, persistence, and motivation than easy or vague goals. Therefore, when it comes to financial goal-setting, it’s important to make sure your goals are SMART.
SMART goals are Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of saying, “I want to save more money,” a SMART goal would be, “I want to save $25,000 for a down payment on a house in the next two years.”
If it’s helpful, start by breaking down larger financial goals into smaller milestones to make them more manageable. Then, assign a time frame to each milestone, so you know how to prioritize your efforts and resources.
By turning your financial goals into SMART goals, you’ll have a clear and actionable framework that ultimately increases your chances of success.
Step 4: Create a Written Plan to Achieve Your Financial Goals
Once you have a list of SMART goals separated into short-, intermediate-, and long-term timeframes, the next step is to develop a comprehensive financial plan to achieve them.
A well-crafted plan provides a clear roadmap for achieving your financial goals, ensuring you stay focused on what’s important. It also provides a framework for tracking your progress and adjusting your approach when necessary.
Furthermore, people who have a written financial plan tend to be more financially successful than those who don’t, primarily because the act of committing goals to paper fosters a sense of accountability and promotes healthy financial habits. In fact, one popular study found that you’re 42% more likely to achieve your goals simply by writing them down.
Step 5: Consult an Experienced Fee-Only Financial Planner Like Chladek Wealth Management
For most people, setting meaningful financial goals and developing an effective plan to achieve them is a complex and time-consuming process. Consider working with an experienced fee-only financial planner, who can help you create a personalized plan that reflects your unique circumstances and goals.
Chladek Wealth Management specializes in comprehensive financial planning for busy families and pre-retirees. If you’re looking to fast-track your financial progress and secure your future, please schedule a complimentary “Learn More” call. We look forward to hearing from you!