How to set financial goals and get to where you want

Want to start making changes with your money, but not sure how? We’ve got it covered.

Thinking about financial goals for the future can be daunting. There’s a lot to consider and it’s hard to know where to start, which can deter you from making a plan, but doing nothing is going to leave you with exactly that.

Goals are vital in helping you understand what your financial future could look like, as well as giving you something to aim for.

Remember, everyone has their own journey. What you might consider a goal could be irrelevant to others. Just focus on where you are and what you want in life.

How to define your financial goals

One of the easiest ways to set out a goal is by asking three simple questions:

What do you want?

Your first home, a new kitchen, a holiday, an early retirement? This is the time to think about what you truly want.

When do you want to achieve this goal?

You don’t need an exact date, but the more specific, the better.

How much do you think you’ll need to achieve this goal?

You can start with a rough estimate and then refine it as you go.

If you have more than one goal, try to order them into high, medium and low priority.

For example, you may decide paying off your high-interest debts is your first priority, followed by building an emergency fund to cover unexpected expenses. Or, if you know you’re going on holiday in six months, you may want to focus on saving for that first.

Now, the next step is to start finessing your goals. A common way of creating great goals is by using the SMART method:

• S: Specific – The more specific a goal is, the more effective it is to plan for.
• M: Measurable – How will you know if you’re making progress towards the goal? For example, are you meeting your monthly savings target?
• A: Achievable – Can you achieve this goal within the set timeframe?
• R: Relevance – Does the goal align with your values and longer-term objectives?
• T: Time-based – When is a realistic end date?

Defining your timeline

It’s a good idea to have a mixture of long and short-term goals so that your money can start working now for what you want in the future. Timelines are dependent on each individual, so shorter or longer goals might be more relevant to your situation.

• Short-term goals: Less than three years
• Medium-term goals: three - 10 years
• Long-term goals: 10+ years

There are so many things that can happen in your life, so it’s really important to pick out key goals. There is no set path in life for anyone and as you know things can take a different turn when you least expect it.

How do you keep yourself accountable?

Reviewing your progress on a weekly basis can help ensure you are on track. Carve out 15 minutes a week and stick to it.

Having an accountability partner to hold you to your promises can help keep you on track. Pick someone you trust to motivate you to keep going.

The benefits of saving early

The sooner you start thinking about your finances, the better position you will be in in the future.

For example, say you start saving or investing at the age of 25. You’ll have plenty of time to benefit from the magic of compounding. This is where the profits you make go back into your savings pot and start generating their own returns.

Think of a snowball rolling down a hill, gathering snow and getting bigger and bigger. That’s what happens to your money with compounding.

But if you start saving at 40, for example, you’ll have less time for your money to compound and you may have to use more of your money to bridge the gap.

And that’s it! Take things slowly and really think about what you want to achieve in life, you’ll soon be on track to getting there.

Remember, your investments can go up and down and you could end up with less than you started with. Past performance does not guarantee future results. The information provided is financial guidance and should not be considered financial advice.