Setting Financial Goals

1. Think About What Is Important to You and Write It Down

Setting financial goals is an exercise in self-reflection. To know what you want to work towards financially, it’s important to reflect on what is most important to you and where you are in your financial journey. If your financial goals aren’t aligned with your values and ambitions, you will likely be less motivated to accomplish them.   

Take a moment to consider what you most care about and what you envision for your life. Whether you dream of owning a home, putting your child through university, or spending your retirement travelling the world, your financial goals should help you work towards making your dreams a reality. Once you’ve pinpointed what you’re working towards, write it down as a reminder so that you can readjust your goals if your priorities or circumstances change.

2. Make Your Goals SMART

After you’ve identified your goals, it’s time to come up with a plan on how to achieve them. General goals such as simply saving more money or raising your credit score are difficult to measure and tend to be unclear when you’re just starting out, so it’s important to develop clearly defined criteria for what you want to achieve.

The SMART framework is a particularly successful model for coming up with attainable, actionable goals. A goal is SMART when it is specific, measurable, achievable, realistic, and time-framed.

If your goal is to develop an emergency fund, your SMART goal might look like the following:

• Specific: You want to save $12,000 for an emergency fund.

• Measurable: You plan to put aside $200 a month to contribute to the fund.

• Achievable: When you take into account your monthly expenses, your disposable income allows you to contribute $200 a month to your emergency fund without impacting your ability to meet your other financial obligations.

• Realistic: You can reasonably allocate $200 a month due to your income and expenses. Otherwise, you may need to adjust your goal.

• Time-framed: You want to have $12,000 saved in five years.

3. Establish a Budget

Knowing how much you are spending each month and if all your expenses are necessary is an integral part of setting attainable financial goals. Creating a new budget or updating an old one can help you keep track of your progress, identify needless spending and feel more confident in your financial strategy.

To learn more about how to create a budget, visit our Money Matters page or download the CUA Monthly Budget Tracker.

4. Determine Whether Your Goals Are Short-Term, Medium-Term, or Long-Term

Knowing how far in advance you are planning for will influence what strategies you use for saving and investing. We can break down financial goals into three categories:

• Short-term: (2 years or less): Creating an emergency fund, paying off credit card debt, saving for a trip or special occasion, or planning for a small home renovation.

• Medium-term: (3 to 5 years): Buying a car, saving for a down payment on a home, taking a long or expensive vacation, or paying off debt.

• Long-term: (6 years or more): Paying off student loans, saving for retirement, paying off a mortgage, beginning a business, or starting a tuition fund.

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