How to set and keep financial goals – Part 1

When I first met with a financial planner a few years ago, I was clueless about what I wanted to do with my money (read Why You Need Financial Goals for the whole story behind why I changed my mind). I’m a teacher, so the idea of goal setting comes naturally to me, but for some reason it never really extended to money. It took years of irresponsibly spending my money to reassess the idea of setting financial goals.

Setting and writing down specific financial goals can mean the difference between living paycheck to paycheck or having financial freedom, the difference between going into debt for that new car or paying in cash, the difference between accepting your financial state or changing it. They are personal to you and to your situation, but by following 5 simple steps, you can articulate where you want to go and how you are going to get there. You can also download my FREE Financial Goal-Setting workbook.

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Get a blank sheet of paper and a pencil (or see page 1 of the Financial Goal-Setting workbook). List everything that you want to do with your money. For now, ignore your current financial situation and any specific amounts needed. We’ll consider those factors later. Just write. Think big and think small, think long-term and short-term.

Some examples of what you may want to consider:

Think about debts you need to pay off – credit cards, car payments, mortgage, personal loans, student loans…

Change personal behaviors – create and stick to a budget, lower unnecessary spending, live within your means, improve money habits, increase income, improve your credit score…

Consider savings and investments – emergency fund, personal savings account, real estate, mutual funds…

Don’t forget retirement savings, both through your employer and individually – 401(k) or 403(b), IRA or Roth IRA…

Also think about specific things, both big and small, that you want to save for – car, house, computer, phone, vacation, shopping trip, musical instruments, furniture, jewelry, taking a course…


All of these goals will fall into one of three categories:

Short-term goals will be accomplished in 1-2 years. This may include saving for a vacation or paying off credit card debt.

Mid-term goals will be accomplished in 3-5 years. This could include saving for a down payment on a house or paying off a car loan.

Long-term goals will be accomplished in 5 or more years. This includes retirement savings or saving for a kid’s college education.

These categories describe when the goal will be accomplished and crossed off the list. This does not mean that you can’t or shouldn’t work on achieving it now. You’re not going to have retirement savings in 30 years if you don’t start now.

Put all of your goals under the right header. Attach specific amounts, estimating if necessary. For instance, you may have $5,000 of credit debt or you need $1,000 for that new computer. You may be aiming for at least $1 million in retirement savings (check out Nerd Wallet’s Retirement Calculator if you want to see how much you’ll need).

It can feel overwhelming to see all of this on one page, especially if you haven’t started saving yet or if you are making less than you would like. That’s OK. In steps 3 and 4 we are going to break it down into manageable steps.

Use page 2 of the Financial Goal-Setting workbook to help you consider the timing of your goals.


If you are anything like me, there are many things that you want to do with your money (I have 15 goals on my list!), but you can’t afford to do them all at once. That’s OK. We’ve taken the time to think big picture, and now we are going to break it down. Look at your list and choose 3-5 priorities (or fewer). Put a star next to them. This will determine what you are going to work on first.

If you have high-interest debt such as credit cards, this should absolutely be one of your top priorities. Don’t go further into debt to try and accomplish your other goals. Get rid of debt first.

You’ll be revisiting your plan over time, so your other goals won’t be forgotten. You may accomplish a short-term goal quickly and be able to put that money towards something else. Your priorities and your financial situation may also change over time.


It’s now time to look at your current financial situation and create realistic steps to achieve your prioritized goals. Focus on now, and not what you will do when you get that raise or that new job. You can revise your plan when those things happen.

If you don’t already have one, create a realistic budget. Take a look at your monthly income. If you have variable income, look at the last few months and use the lowest amount to plan with. It is better to plan to live on less than to assume you’ll get more than you actually do. Any extra can be put toward achieving your goals.

Subtract your necessary monthly expenses from your monthly income (such as housing, transportation, food, and bills). If you aren’t sure what you spent, go through your bank statements from the past three months. The remainder is what you have to work with each month for variable expenses (such as shopping or going out to eat) and to achieve your goals.

On a new sheet of paper, computer document, or page 3 of the Financial Goal-Setting workbook, we’re going to create the specific steps you’re going to take to work toward your goals. Make them SMART (Specific, Measureable, Attainable, Relevant, Time-bound). Have you ever noticed how quickly people give up on New Year’s resolutions? They were probably missing at least one of these. How To Set and Keep Financial Goals – Part 2 will go into more detail about SMART goals.

Write down your 3-5 priority goals only. Put the amount you need to accomplish it and the target date that you are aiming for. Finally, what steps are you going to take to achieve this particular goal? Your steps will probably include putting a certain amount of money towards a goal each month. It may be a big amount or a small amount, but either is OK. Do what you can. Putting $100 towards debt is better than putting nothing towards it. You can increase that amount when you are able. You can also set smaller targets. If you owe $5000 in credit card debt, you can aim to pay off $1000 this year. This may make it more manageable.

Steps can also be educational. Talk to your HR department to learn more about retirement possibilities (many employers match up to a certain percentage – free money!). Maybe you want to learn more about investing and how to get started (I highly recommend Millionaire Teacher for this). Whatever your steps are, write them down and don’t forget to make the SMART!


When something is easy, people are far more likely to do it. If your goals involve putting money into savings, investments, or to pay off debt, automate! Check your online banking profile or go into a bank branch to talk to someone. Set it up so that a specific amount of money is automatically taken out of your checking account on a certain day and deposited in a savings account or paid toward a credit card. You won’t have to think about it and you will learn to live on less.

Whenever something in your financial life changes (and at least once a year, preferably more), revisit your plan and make any necessary changes.  

Those are the 5 steps to create financial goals.

  1. Brainstorm your goals
  2. Consider timing
  3. Set priorities
  4. Make your plan
  5. Automate and revisit!

Download the free Financial Goal-Setting workbook to help you organize your goals, and read on to Part 2 for tips on how to make sure you KEEP your financial goals.

What are some of your priority financial goals? Tell me in the comments.


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