How to Set a Financial Goal: 3 Tips to Help You Reach It Early
4 min. read
By: FCU Team
What are your financial goals for the next year? Saving money, paying off credit card debt, or investing in a retirement account? Whatever those goals may be, there are steps you can take today to make sure you accomplish them sooner rather than later.
This blog will discuss how to set SMART financial goals and share three simple financial tips to help you achieve your goals early.
Setting SMART Financial Goals
Before we go any further, let's go over what makes an excellent financial goal. While making any financial goal is almost always a step in the right direction, making sure your goal is specific, measurable, achievable, and relevant will help set you up for success. That's where the concept of SMART goal setting comes in.
When you’re ready to set financial goals, ensure they are:
Specific: Don’t be afraid to drill down your goals and add in some detail. A goal to “save money” leaves too much up in the air. Instead, try narrowing in on what you truly want, like “save $20,000 for a down payment on a house.”
Measurable: Your financial goals should also be trackable. Whether that means opening a savings account to watch as your balance gets closer to your goal or downloading a budgeting app to track your spending, map out a way to measure your progress.
Achievable: Setting ambitious financial goals can feel motivating, but be sure your goals are realistic enough to be attainable. "Become a millionaire" has a good ring to it but is it something you can accomplish in a reasonable timeframe?
Relevant: Make financial goals that make sense for your budget and your lifestyle. What do you value? What are your long-term financial goals? What are you willing to cut back on to reach your goals, and what's non-negotiable?
Time-based: Give yourself a timeframe for accomplishing your goal. You want to set yourself up for success with a realistic deadline that’s just tight enough for an extra push of motivation. For example, “I will have $1,000 in my emergency fund in six months.”
3 Tips to Help You Meet Your Financial Goals (Early!)
Write Out Your Goal
Setting a goal is step one toward improving your financial standing. But it's step one of many. Creating a plan — even if you follow the SMART goal guidelines — is one thing. Reaching it is another. To give yourself the best chance at hitting your objectives, you'll need a clear, detailed, and, most importantly, written-out goal.
Why is writing down your goals and your plan to reach them so important? It’s neurological.
Writing things down helps improve recall by encoding information in your brain. When you put your goals to paper, your brain transfers that data to the hippocampus. The hippocampus is the part of the brain responsible for determining what to store as long-term memory and what to forget. Written information is classified as more important by the brain, which means it's more likely to retain it.
Later, when you’re making a decision, say whether to splurge on new shoes despite your goal to pay off your student loans, your brain will recall that information to help you make the better choice. By keeping your goal top of mind — literally — you’re increasing your chances of hitting that milestone in the timeframe you’ve set.
Create a Plan for Your Goal, Starting with a Budget
To reach your goals, you'll need a plan, and the essential part of that plan is often your budget. It is the baseline that helps you determine how much money you have available to spend on different things each month, and it's also an excellent way to figure out what lifestyle changes might be needed to reach specific goals.
To start, create a budget for yourself and track your spending habits. Start simple. How much money do you bring in each month? What are your monthly expenses? Once you have an idea of how much money you're putting towards specific areas in life (e.g., groceries, rent), it will be easier to decide which expenses to prioritize or cut back on. You can check out our other blog on different budgeting strategies here.
Next, you'll need to figure out what it's going to take to meet your goals. Say you have a short-term goal to save $1,000 in six months, as in one of the examples above. That means setting aside $167 each month for six months. Where can you find $167 in your budget? It may mean cutting back on miscellaneous shopping or substituting your premium gym membership for home workouts. For larger goals, like paying off your debt or saving for retirement, the steps you'll need to take may be more significant, making sticking to your budget even more critical.
Search for Ways to Give Yourself a Boost
There are no cheat codes in life, but that doesn't mean there aren't steps you can take to give yourself a little boost along the way.
Do you have a skill you can use to make some extra money? Freelancing on nights and weekends can earn you a head start on your savings or more wiggle room in your monthly budget. What about furniture or designer items you no longer use or need? Selling these pieces even at secondhand prices can bring in a few dollars you may not have been counting on before. Don't forget to evaluate any subscriptions or auto-orders you've set up. You may be spending $10, $50, or more than $100 a month without realizing it, and canceling those payments can free up your finances.
Get creative and put any earned money, extra funds you bring in, or expenses you cut out toward reaching your goals!
Set Yourself Up for Success in Your Financial Plans
Personal finances are just that, personal, but that doesn’t mean you can’t find some help managing your money, savings and investments. There are countless resources for financial education — including the FCU blog — packed with tips, tricks, and guides on crushing your money goals, living debt-free, and more. Talking to a financial advisor is also an option when working toward long-term goals. However, you work at them, know your goals are within reach if you set yourself up for success with a plan.