It’s 2025 and as we begin a new year, it’s a great time to reflect on your financial goals and make plans (or update them!) for the future. Whether you’re a student, a professional, or facing down retirement, clear financial objectives can help you achieve financial freedom. So let’s get started on setting your goals and making a plan to reach them.
Why Setting Financial Goals Matters
Setting financial goals Is how you create a roadmap for your financial future. After all, you can’t aim if you don’t know where you’re going! I like the SMART goal framework – make your goals specific, measurable, achievable, relevant, and time-bound. That way, you can take control of your finances and work towards a brighter future.
Some of the benefits of setting financial goals include:
- Improving your financial well-being: Knowing what your goals are will help you make better decisions and remove some money-related stress.
- Increasing your motivation: We all have an easier time staying on track when we can see the finish line.
- Boosting your discipline: It can be tempting to spend impulsively, but if you know those designer shoes will set your dream Paris trip back a year, you’ll have an easier time deciding it’s not worth it.
- Reaching financial security: One of your goals should be reaching financial freedom – whether that means retiring early, or starting your own business, or whatever that looks like for you. However, by making it an actual goal, it won’t be a vague and unclear notion, but an actual plan that you’ve sorted out.
Identifying Your Financial Goals
So let’s start by setting your financial goals. I generally recommend people come up with at least 1 goal for each time frame – short-term (or something you want within the next 12 months), medium-term (something within the next 1 to 5 years), and long-term (goals that will take more than 5 years to achieve).
Short-Term Goals
Some examples of short-term goals might be:
- A fully-funded emergency fund (3 to 6 months of expenses, on average)
- A vacation
- Paying off debt
- A new (used) car
- A home renovation project
Medium-Term Goals
Medium-term goals take a little longer, and might include:
- Home down payment
- Year-long sabbatical
- Starting a business
- A dream vacation
Long-Term Goals
Long-term goals tend to be the really big things, but because they seem so far away, people often don’t picture them specifically. They often include:
- Retirement
- Financial freedom (or FIRE, if you’re doing that)
- Moving abroad
- Buying a forever home
Creating a Personalized Financial Plan
So now, we really drill down on your goals.
Clarify Your Goals
First, really elaborate on those goals. If you’re building your emergency fund, how much is 3 to 6 months of expenses for you in reality? If you want to go on vacation to Hawaii, look up flight costs, pick your hotel, and get an idea of the activities you want to do. If you are planning a home renovation project, call around and get some price quotes (then double them! Those quotes are NEVER accurate!).
This is important for your long-term goals too. Just saying “save for retirement” is meaningless. What does retirement look like for you? Do you want to live in a private community golfing every day? Are you looking at a cruise-ship retirement? Maybe volunteering all around the world? Figure out what will make your golden years joyful and WHEN you want to retire. (I’m an age-62 girl, because I want to have plenty of time to have fun and see the rest of the world that I haven’t made it to yet.) Once the picture comes into focus, start figuring out how much that will cost you – and remember to account for inflation. For some of this, you can use your current income and expenses to judge, but this is an area where the internet is really helpful – all the information is out there somewhere!
Build A Budget
I’ve said it before and I’ll say it again – you can do nothing financially until you have a budget. Yes, to achieve your goals, regardless of the time-frame, you need a budget today. One you’ll stick to. One you’ll update regularly. I track my expenses daily, update my budget with small changes weekly, and make bigger changes monthly.
Create A Saving and Investing Plan
Next, you need somewhere to put your money. For short-term goals, open a high-yield savings account. For medium-term goals and long-term goals, look at investment accounts, so that your money can grow at a faster rate (the downside being, it can take a bit more time to access).
Then, calculate how much you need to save per month to achieve your goal before your deadline. Paris by 2026? Maybe you need to save $200 a month. Retirement at 60? Maybe you need $500 a month going into an IRA. Work those numbers into your budget. And remember, you can – and should – prioritize your goals. You want Paris this year, a house down-payment by 2030, and retirement by 2060, and $1000 a month in your budget to go into savings? Instead of $200 a month, put $500 in the Paris fund, and $500 in retirement. Instead of a year to reach your (made-up) goal of $2400 for Paris, you’ll achieve it in 5 months, and then can put that full $500 towards the house down-payment – and you’ll feel more motivated to save, having already reached one goal.
Keep Control Of Your Debt
As I said before, first goals are your emergency fund and eliminating debt. But now you’re debt-free and working towards more fun goals. It’s key to remain debt-free. Frankly, I recommend not even carrying credit cards day-to-day. Eliminate the temptation to use them. And if you consider buying something unexpectedly, do two things:
- Calculate how much time you have to work to pay for it (including interest, if you’re thinking of charging it)
- Calculate how long it will postpone achieving one of your goals
When you realize that it means you’ll miss spring in Paris and take an extra 10 hours of work to cover the cost, you’ll likely decide you don’t need it so much.
Staying Motivated and Tracking Progress
Reaching your goals won’t be easy. At times, you may even become disheartened, feeling like you’ll never get there. But it’s important to stay motivated.
Visualize Success
That Paris trip? Sounds vague and far off. But make a physical vision board to hang on your fridge, or a digital one that will be the wallpaper on your laptop! Include pictures of the Eiffel Tower, the Seine, the dessert from the fancy restaurant you want to go to.
In addition to the vision board, do non-financial things to start preparing. Learn French with Duolingo so that you can converse with the locals (or at least order a coffee). Start walking regularly so you can traipse around the city. Add a little French flair to your outfits. Do whatever it takes to keep your goals in the forefront of your mind, to make them stay tangible for you.
Celebrate Regularly
When you reach a milestone, reward yourself. Our brains get a little hit of dopamine when we buy things – that’s why therapeutic shopping is a thing. So break your big goal into smaller parts. Maybe at the halfway point for your Paris budget, you set aside $50 and go to dinner at that hot French place in your hometown. Saving for a house down payment? Every time you get 10% closer, you get to pick up one small item for your new future home.
Track Your Progress
Excel, coloring a paper thermometer, or using an app – I don’t care how you do it, but track your progress regularly. When you’re near your goal, knowing that is going to make it even easier to save. And if you get off-course, you’ll know that as well and can redirect faster!
Be Adjustable
Saving for your goals shouldn’t be a lesson in torture. It’s saving for things you WANT! But sometimes, things come up – important things, like a medical emergency, or other things, like a new gaming system that…hey, you just really want it, even if it’s going to postpone Paris for three months. That’s okay! Sometimes our priorities shift. Budgets and savings plans are adjustable. You can update your plan and then keep going. No judgement here!
Stay Accountable
I do recommend that you have an accountability partner. We all are more likely to achieve our goals if someone else knows about them – and you’ll get support and encouragement (or maybe you’ll achieve it out of spite for a grumpy, jealous relative – I don’t know your life!). Talk about your goals, maybe even save alongside a friend who’s working on a goal for in similar time-frame!