Setting Financial Goals that Work

Setting Financial Goals that Work

6 second take: Setting financial goals is an art. Make sure you’ve got the right goals and strategies to make your dreams happen.

For financial goals to work, they must have meaning. This is the fundamental problem with “cookie cutter” goals: They lack meaning for your own situation.

Goals are separate from plans. For a plan to have meaning, it needs to be based on goals. Last week, we discussed starting your financial-literacy journey from where you are by assessing your present situation. This week, we’re discussing goals — where you want to be and what you want to have financially. Once you have these, the process of planning how to get from point A to point B starts to come together.

Setting ‘SMART’ Financial Goals

Many people use the “SMART” acronym when setting goals. It stands for “specific, measurable, attainable, realistic, and time-bound.” This is a great starting point, but we need to modify it slightly for financial planning purposes.

Setting Specific Goals

Specific goals have clearly defined attributes. For example, the goal of buying a car with cash in three years is very dependent on what type of car you wish to buy, whether you want new or used, and so forth.

For long-term goals like a retirement that’s over 10 years away, it can be difficult to have a clear vision.

Some people do, some don’t — either way is okay. If retirement is a long way off, you can consider using your current lifestyle as a base and quantify any changes you want to have. For example, you may want to maintain your current lifestyle, but also do some more traveling. Great. Now you have two things to consider: First the cost of your current lifestyle, and then the cost of the travel that you want to do. It isn’t really necessary to get a lot more complicated than that if retirement is a long way away.

Setting Measurable Goals

Goals must be measurable. If you want a vacation home in five years, you need to be able to put a number on it. What will it cost? Will you finance a portion of it with a loan? All measurable things. Sure, the actual numbers will likely end up being different from the original plan. But you can adjust your plan as you go, ultimately ending in a place where your plan and the reality end up being quite close.

Setting Attainable and Realistic Goals

Goals must be attainable and realistic. Kinda. Here we get to deviate a bit from the SMART goal script — within reason. Your car goal in three years does need to be attainable and realistic. Your long-term goals, though? Not so much. Many people can’t start out on-track for long-term financial goals. These goals are too big, and when you’re just starting out, you have fewer resources and higher resource demands. For example, you may be saving for a down payment on a house while also paying rent.

If people just starting out had to use only what they could currently afford for a retirement goal, it might look pretty bleak. Here is where it’s okay to deviate from the “SMART” goal requirements. Your retirement goals may not seem realistic or attainable right now, but you should have them anyway.

This isn’t just an issue for young people. It’s not uncommon for people to be 10 years away from retirement with minimal savings. The goal of a comfortable retirement may not look at all attainable or realistic on paper, but that’s okay. Looks can be deceiving. You may be surprised by what you can accomplish once you get going!

Setting Time-Bound Goals

The final “SMART” requirement is that the goal is time-bound. This is a big part of the difference between a dream and a goal. A dream is something that you wish to do “someday.” A goal defines when “someday” needs to become a reality.

Visualizing Your Financial Goals

It may help to spend a bit of time visualizing your goals. Carry a piece of paper with you for a couple of days, think about your goals, and take notes as thoughts come to you.

Don’t rush the process — you need to own the end results. Couples should spend a bit of time discussing big goals. You may find you need to compromise or add in some things that are important to your partner that you may not have otherwise considered.

Also consider which of your goals are the most important. For example, maybe you want to buy a vacation home and also retire early. If you could only be on track for one of them, which would you choose? This will be very important for planning and allocating funds.

Make Your List Complete

Vacation homes, new cars, and early retirement are exciting things to think about. On the other hand, thinking about what happens to your family if you become sick or injured and can’t work can be a drag. But it’s at least as important.

You should have an idea what you would like to have happen (financially) if you were to die prematurely or if you were to become unable to work for any reason. Your views on these issues will be very important in laying out your financial game plan.

It’s also important to consider what you need or want to have in an emergency fund. (Though I prefer the term “cash reserve” as opposed to “emergency fund” — mostly because it’s not just for emergencies. You can also use it for unexpected opportunities.)

Next Steps After Setting Financial Goals

Once you’ve determined and prioritized your goals based on what’s important to you, you’re ready to go to the next step: planning how to reach your goals. We will start discussing that next week. Until then, continue to be intentional with your money.

LendingPoint is an Atlanta-based lender and servicer, redefining who can access money at fair rates.


To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.

* Applications submitted on this website may be funded by one of several lenders, including: FinWise Bank, a Utah-chartered bank, Member FDIC; Coastal Community Bank, Member FDIC; Midland States Bank, Member FDIC; and LendingPoint, a licensed lender in certain states. Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates ("APR") may vary based upon LendingPoint's proprietary scoring and underwriting system's review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 7% may apply depending upon your state of residence. Upon final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. Loans are offered from $2,000 to $36,500, at rates ranging from 7.99% to 35.99% APR, with terms from 24 to 72 months.  Minimum loan amounts apply in Georgia, $3,500; Colorado, $3,001; and Hawaii, $1,500.  For a well-qualified customer, a $10,000 loan for a period of 48 months with an APR of 24.34% and origination fee of 7% will have a payment of $327.89 per month. (Actual terms and rate depend on credit history, income, and other factors.) Customers may have the option to deduct the origination fee from the disbursed loan amount if desired. If the origination fee is added to the financed amount, interest is charged on the full principal amount. The total amount due is the total amount of the loan you will have paid after you have made all payments as scheduled.

1. Alimony, child support, or separate maintenance income need not to be revealed if you do not wish to have it considered as a basis for repaying this obligation.

2. The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning FinWise Bank is the FDIC Consumer Response Center, 1100 Walnut Street, Box #11, Kansas City, MO 64106. The federal agency that administers compliance with this law concerning Coastal Community Bank and Midland States Bank is the Federal Reserve Consumer Help Center, P.O. Box 1200, Minneapolis, MN 55480. The federal agency that administers compliance with this law for LendingPoint is the Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.

Click here to see our current list of state licenses

California residents click here ››

Wisconsin residents click here ››

Ohio residents click here ››

LendingPoint's NMLS #1424139 Visit NMLS Consumer Access