Setting good financial goals can help you eliminate debt, save for short-term or long-term goals or fund your retirement account. It is imperative to develop a game plan for setting good financial goals to attain them and build the wealth you desire. 

By Brandi Fowler

You can better prepare for the future when you set solid financial goals. But knowing how to set them — and achieve them — is key. 

“Financial stability helps people sleep better at night, which is important for overall financial health, and it also makes you feel more confident in the future,” said financial activist and Priceless Tay founder Taylor Price. “Potentially, you could take risks in your career or in a side hustle. That may not be possible without having those financial goals.”

Setting financial goals so you can have "benchmarks" is a good idea, said personal finance coach and TheMoneyCoach.Net founder Lynnette Khalfani-Cox. 

“[Obtain] clarity around what you want to do in the short-, medium-, and long-term, and make sure you have achievable results,” Khalfani-Cox said. 

For those benchmarks, Khalfani-Cox advised staying away from vague goals. 

“They might say, ‘Oh, I want to buy a new house at some point in the future,’ or, ‘I want to buy a new house in 2023.’ Well, that's just kind of like a wish. That's not really a goal. You really want to think about SMART goals, goals that are specific and measurable, action-oriented, realistic and time-bound.”

SMART is an acronym for Specific, Measurable, Achievable, Realistic, and Timely. 

According to LinkedIn News, Specific tells people “what to focus on and what expected actions exist.” Measurable is “the part of the goal you can quantify,” Achievable denotes goals that are possible to achieve, Realistic means creating goals that are realistic and relevant, and Timely refers to goals achieved within a set deadline. 

Focus on aligning yourself with a vision for the future, what you want to achieve personally or financially, and tailor your financial goals to that, Khalfani-Cox said. 

Start With a Self-Assessment When Setting Good Financial Goals

Obtain a clear idea of your finances before developing a game plan for your financial goals.

“From a financial perspective, you have to step on the scale,” Khalfani-Cox said. “If you are saying, ‘I want to pay off debt,’ or, ‘I want to save more money,’ you have to know where you are starting from, what's your starting point.

“I think all too often a lot of people are afraid to do the deep dive or to look in the mirror, and see, ‘OK, how much damage have I done? Where is my level of savings?’ You need to track and measure incremental progress along the way.”

Also, understand what you want to accomplish during different timeframes — and try not to list too many goals to achieve at once, Khalfani-Cox said. 

“I think a lot of times people overwhelm themselves with goals, or they don't think out the execution part of reaching their goals and how much effort it is going to take to achieve [them] in a specific period of time,” Khalfani-Cox said. 

“Part of the reason you want to do prudent goal-setting is to understand which of these goals are achievable in the short-term, which are medium-range goals, and which are goals you want to accomplish over the long haul.

“Once you map that out, you will see that a lot of things that people want to buy, do, achieve, or aspire to, almost everything has a price tag attached to it. And because none of us has an infinite amount of money, you need to be thinking realistically about the cost factor involved in achieving various goals.” 

Track your progress. “What is not tracked and measured and rewarded basically doesn't get done,” Khalfani-Cox said. 

Develop a Budget to Set Good Financial Goals 

Setting a budget will help you develop your financial game plan.

“Without having any idea on where your budget is, it's really hard to create financial goals that are SMART,” Price said. “So starting off with a budget is really important.”

“Then ask yourself a few questions like, ‘Are you maximizing your retirement account? Do you have an emergency fund? Do you have debt?’ If so, what's some high-interest debt that you can pay off or offload? Can you save more each month? If you have credit card debt, are you carrying a balance over each month?”

You could start creating your budget by adhering to a budgeting concept called the 50/20/30 method, Price said, which is 50% needs, 20% wants, 30% savings. 

“Some people do the other way around where it's 20% savings and 30% wants,” Price said. “I always think savings should go first. But depending on where you live, it's needs-based. If somebody lives in San Francisco, those needs will be a lot higher than somebody who lives in a rural town in the Midwest.” 

In addition, Price suggested automating your savings through round-ups to help build it. You can use a round-up app like Acorns or Chime, or opt into a round-up program via your bank. 

“I know it sounds like pennies, but at the end of the year, [it adds up],” Price said. “And so, if you are rounding up to the nearest dollar or rounding up to the nearest five or to the nearest 20, whatever your budget allows you to do that, then at the end of the year it's like, ‘Oh man, I do actually have a lot of money saved.’ Just having that automation is something that you can do pretty much frictionlessly.”

Price also advised separating your financial goals into categories once you have your budget in place. 

“[Ask yourself], ‘How much do I want to save? How much do I want to spend on vacations, for example? Or how much do I want to put towards retirement?’” Price said. “And then, go from there.”

Learn How to Cut Debt to Set Good Financial Goals

American household debt hit a record $14.6 trillion in the spring of 2021, according to Debt.org. So, it is a good idea to start cutting yours. Once you eliminate debt, you can focus better on saving and other financial goals. 

“Having dug myself out of debt, one of the things that I realize now is that getting out of debt is one thing, but staying out of debt is the real thing, is the much harder goal to accomplish,”  Khalfani-Cox said. “A lot of people who pay off the debt go right back into debt.”

You can help break the cycle by adopting a new mindset about your finances, Khalfani-Cox said. 

“I tell people to think about adopting what I call a zero-debt mindset,” Khalfani-Cox said. “That means, one, having rules and guidelines for when you whip out your credit card. You shouldn't automatically think that using credit to pay is always the norm or is a crutch for you. 

“Most people and most financial experts suggest that you pay off your high-interest rate credit card debt first. That's not my strategy or the tip that I give. I actually suggest that you attack your area of pain. What is bothering you the most?”

It also helps to understand what drove you into debt, Kahlfani-Cox said. “Americans get into debt because they fall into one of two categories. One, they're classic overspenders or poor money managers. The other folks who fall into debt are those who have been subjected to what I call the dreaded Ds. Downsizing from a job, death in the family of a main breadwinner, divorce, disability, or disease.

“It can throw your finances out of whack. And for a lot of folks, it forces them to live on plastic and to start relying on credit cards more often. But if you want to dig yourself out of debt, it's important to look at the root cause because sometimes the best solution for you is tied to what the problem was.”

Take Advantage of Investing in Your 401(k) and IRA Accounts to Set Good Financial Goals

Saving for retirement might not be the first thing on your mind when you are younger, but investing in your 401(k) and/or an IRA account as early as possible can help you hit the target for your future financial goals faster.

“Ask your job if they have a 401K available and if they have an employer match back,” Price said. “That basically means free money for that person who has that job. That is the first question to ask because who doesn't like free money?”

Next, if you have your emergency savings fund set up and are making a salary that allows you to invest in a Roth IRA, consider doing it, Price said. 

“It is a tax advantage,” Price said. “We don't want to just give all of our money away. We want to retain as much money as we can and also beat inflation.

“A Roth IRA is a retirement account that you invest money in over periods of time. And eventually, when you retire, you have a nice sum of money that you don't have to pay taxes on and an actual amount that you can utilize. Those are the two accounts that I would say somebody should really, really look at, especially at a young age because as Albert Einstein says, ‘Compound interest is the eighth wonder of the world.’”

Celebrate Small Wins 

Remember to celebrate your wins as you set and achieve your financial goals.

“One of the biggest tips that I give people who are goal-setting is to celebrate those small wins,” Khalfani-Cox said. “People want the end result, but again, you have to keep in mind the timeline. Those small victories along the way should be absolutely celebrated, recognized, and compounded. You want to keep doing the same thing that has gotten you results.” 

Top Takeaways

How to Set Good Financial Goals

• Set SMART financial goals: specific, measurable, achievable, realistic, and timely. 
• Do a self-assessment of your financial situation before setting financial goals.
• Don’t set too many goals at one time. Set goals that are attainable and realistic. 
• Adopt a new mindset about your finances, especially about debt. Understand how you went into debt in the first place to avoid doing it again.