Are you ready for your next milestone? Maybe you’re engaged, planning a memorable wedding. Or you’re ready to buy and furnish a house. An important step to achieving these special moments is simple: set concrete goals. Financial goal setting doesn’t have to be complicated — here’s how you can do it yourself with smart tools that can help simplify saving along the way.
Start by taking financial inventory
Before you begin thinking about all the saving (and spending) you’d like to do, it’s a good idea to see where you’re starting from. Assess your current financial situation by reviewing all of your accounts, from checking and savings to retirement and investment portfolios, as well as noting any debt or loans you are paying back.
This process can help you identify areas where you may want to set financial goals. Plus, having a strong understanding of where your finances started will give you a baseline to look back on as you begin saving.
This is a good time to also review your budget, if you have one. (If not, creating a budgetmay be a goal to consider.) While you might need to adjust your current budget as you introduce new financial goals, it doesn’t hurt to make note of what spending and savings habits are working for you or haven’t been so successful in the past.
Now that you have a clear picture of where you stand financially, it’s time to start thinking about where you want to go. You don’t have to get specific yet, but consider the major goals you hope to achieve, such as paying off all credit card debt, solidifying an emergency fund or taking an extended vacation. Write your ambitions down with a pen and paper or make a note on your phone. Then, start to think about which of your goals matters most to you and note whether they are short- or long-term priorities.
Create S.M.A.R.T. goals
After your brainstorming session, it’s time to dive into the nitty gritty of goal setting. The very first step to achieving a goal is also one of the most important: Clearly define what your goal is. One of the best methods for doing so is using the S.M.A.R.T. acronym: Specific, Measurable, Achievable, Relevant and Time-bound.
Let’s apply this method to buying a car. Using the S.M.A.R.T. framework, let’s make this an actionable goal: I want to buy a small hybrid SUV, up to $30,000 in two years. This goal is …
Specific: You named the type of car you want.
Measurable: You can measure your savings progress toward a certain amount.
Achievable: This goal likely isn’t wildly out of reach (such as, for instance, buying a luxury yacht next month might be).
Relevant: This goal makes sense for your life and timeline.
Time-bound: We stated you want to make the purchase in two years.
Remember, it’s okay if your goals are challenging as long as they are realistic. You don’t want to set goals or parameters for yourself that are going to be impossible to meet or detrimental to other areas of your life. That can lead to discouragement, lack of motivation and even lead you to stop trying.
Develop an action plan
With your eyes on the prize, it’s time to make an actionable plan to get there. First things first: Write down your goal. Physically writing down (or typing) your goals will keep your objective clear, give you a point of reference and can serve as a simple motivational reminder when you need it. You know what they say: Seeing is believing. And keeping written records of your goals is a powerful tool that can help you visualize success and put you one step closer to achieving it.
Now you can create a plan, and how detailed you make it is up to you. But one simple place to start is by splitting your targets up by short, mid and long-term goals. Since you already made a list of your financial priorities, you have a head start here.
Next, you can think practically about what steps you need to take each week or each month to make progress. If your intention is to save for a down paymenton a home, for example, your plan may include cutting one expense from your budget each month and transferring that money to your home savings. Or if you want to increase your retirement nest egg, your plan could be to boost your 401(k) or IRA contribution by 1% every six months until you reach a certain percentage.
Savings goal calculator
Use the tool below to calculate how much you’ll need to save per week, month or year in order to reach your savings goals. Simply enter your goal amount and how much time you have to save.