11 secrets to setting and reaching your money goals
Everybody has financial goals.
Well, that’s not exactly true. Everybody has financial dreams, and the trick to achieving them is turning them into goals. The difference between a dream and a goal is simple: A dream is what you want, in this case with your money. A goal lays out the specific steps you’ll take to make that dream come true by some future date.
There are right ways and wrong ways to set goals, and they can have a big impact on how quickly and easily you achieve your dreams (or if you’re able to achieve them at all!).
Here are 11 of the best tips on goal-setting from money experts all over the country. Some will be perfect for your situation; others won’t be. Your mission is to figure out which strategy works best for you.
1. Begin with the End in Mind
Legendary productivity and lifestyle guru Stephen Covey made this phrase famous as the first of his 7 Habits of Highly Effective People. In that landmark book, Covey explains that trying to accomplish something without a defined endpoint is like taking a road trip without a destination. You might have some fun and see interesting things, but you won't accomplish as much.
Before you start laying out the specifics of your financial goals, think hard about the largest, longest-term, most important things you want to do with your money. Imagine what it will be like when you accomplish these goals, and what you will be able to do with that level of financial success. Define the finish line, and it will help you define and nail all of your other goals.
2. Set SMART Goals
In terms of goal setting, SMART is an acronym for:
Specific
Measurable
Achievable
Relevant
Time-bound
Specific means you define the goal in concrete terms. You don't want to “do pretty well”; you want to “retire early with enough money.”
Measurable means you put numbers to your goal, so you can easily compare where you are to where you want to be. Not “retire early with enough money,” but “retire with $1 million in the bank.”
Achievable means your goal is something you can reasonably see yourself doing. It’s OK to be ambitious, but if your goal is to retire a billionaire, you won’t believe in that goal and you won’t put serious effort into it.
Relevant means the goal is consistent with your values, dreams, and desires. A goal to retire early doesn't make sense for somebody who loves their job and defines themselves in terms of their career, because a part of them may not want to retire early. If a goal doesn't matter to you emotionally or doesn’t energize and excite you, you won't make the sacrifices necessary to achieve it.
Time-bound means giving yourself a deadline. Not "retire early,” but “retire at 59.” Without a set deadline, it becomes too easy to procrastinate and put off the real work, assuming you’ll have time for it next month or next year.
3. Set Your Short-Term Goals Low
One thing that happens for many people is when they set their goals initially, they set them when they’re feeling motivated about a project or concept. When this happens, they often commit to doing too much too soon and become frustrated within a few weeks when the realities of their lives don't jive with the commitment they made to themselves.
Instead, make those initial steps reasonable and easy to achieve. The encouragement and momentum gained from initial success will carry you through to increasingly aggressive and impressive accomplishments as the weeks, months, and years go by.
One example of where this works is paying off credit card debt. Many people try to pay off their highest-interest credit card first, which often means very slow progress — so slow they eventually give up. But if you initially target your credit card with the lowest balance, that first win (and the thrill of achievement!) comes faster and keeps you going.
4. Go Big with Your Long-Term Goals
By contrast, don’t forget the power of small, incremental contributions over the course of months and years. Remember that saving $5 a day for one year can net nearly $20,000 in a decade.
Keep this in mind when planning for big goals like retirement or that once-in-a-lifetime vacation. Keep your goals within reason, but let yourself dream big. Then plan and set goals to make that dream a reality.
This hack has the added benefit of helping you stay motivated. It’s one thing to aim for a certain balance in your emergency fund, but it’s especially exciting to track your progress toward a Caribbean trip.
5. Set Benchmarks and a Timeframe for Reaching Them
For any goal that will take three months or longer to accomplish, split it into multiple smaller goals, each of which takes about three months.
For example, if you want to pay off the balance on a $15,000 credit card, it could take a few years to celebrate that success. Instead, set a goal of paying $2,500 each quarter. As each of those three-month periods comes and goes, you can check off the box on your to-do list.
This has two advantages. First, it lets you divide intimidating goals into smaller chunks that are easier to accomplish. Second, it keeps you on track toward success. Most people tend to wait until the last minute before getting serious about any goal with a timeline. This gives you multiple “last minutes,” so you’re not set up to fail in the final stretch.
6. Review Your Goals Periodically
Once a quarter or twice a year, review your goals. People change, circumstances shift, and unforeseen events occur (hello, pandemic?). Your financial reality and personal values can also evolve over time.
Reassess your goals from time to time and make sure they’re still SMART for you. You might have to adjust your timeline or change one goal out for another. Don't use this review as an excuse to let yourself off the hook for a goal you still want, but feel it’s too hard to accomplish
7. Write Everything Down
This is the shortest and simplest item on this list. Write your goals down, and put them somewhere you can see them often (think: refrigerator door, phone home screen, tucked in your wallet). Without this step, it’s very difficult to take your goals seriously or keep your focus on them for the long term.
While you're at it, write down or put in a spreadsheet any numbers you’ll need to review while approaching your goals. Keep all this information in a single, convenient place so small details like looking up an interest rate or minimum payment don't waste your time.
8. Make a Dream Board
It’s easier to stay on track if you can get emotionally fired up to achieve your financial goals. One way to do this is by creating a dream board.
A dream board is a bulletin board, collage, flow chart, or another piece of art that helps you visualize the process and the results of the goals you’ve set. It might include photos of a dream home, pictures of happy kids, or a specific financial amount written in big red numbers.
The specifics are up to you, your creativity, and how much time you want to spend. What's important is that you create something that excites you about your goal and keeps you motivated to make it happen.
9. Get an Accountability Buddy
An accountability buddy is a trusted friend or coworker you meet with on a regular basis who will ask you how much progress you've made toward your goals, and sometimes give you the necessary kick in the pants to get you back on track.
An accountability buddy offers several benefits:
Provides an opinion to help you make decisions
Gives feedback on your successes and failures
Offers ideas and solutions when you encounter obstacles
Makes the whole process more enjoyable vs. you doing it alone
10. Make Tracking Easy
Setting a goal without measuring your progress makes the goal largely useless. You need to track your progress toward your financial goals on a monthly basis, preferably with a brief check-in every week or two.
If it’s difficult to find the numbers you need to track your financial progress, this step will take more time than necessary, and you’ll be tempted to skip it because of the hassle. So spend the extra time once to automate and simplify gathering the information you need for tracking.
Some steps might include setting up a spreadsheet, writing down interest rates and spending limits for your credit cards, or installing personal finance apps like Empower on your phone. The specifics will vary, but the easier you make it, the better your chances of success.
11. Find Invisible Opportunities
An invisible opportunity is anytime you can automate your financial goals. This allows you to make progress without doing any work. The most common invisible opportunities include:
Automatic contributions to retirement funds
Apps that round up purchases to the nearest dollar and invest the difference
Putting overtime, bonuses, and other income immediately toward your goals
Final Thought
Many people want specific things out of their finances, but they also feel helpless to do anything about it. Although every situation is different, if you set SMART goals that work within the constraints of your financial reality, you may be surprised how quickly that reality changes.