Money goals: How to set your financial goals

Setting some solid money goals sharpens your long-term vision to help you make good decisions in the short term.

If you don’t know where you’re headed, how do you know you’re on the right road? You can work hard your whole life and never quite get to where you want to be. That’s because you’ve taken a wrong turn, or spent your money on the wrong things, without even knowing it. Without a destination in mind, you’re not really working towards something. You’re just working.

Being clear about your money goals is the way to translate your hard work into something meaningful.

To make the most of your money (and in turn your life), you need to work out what your financial goals are and make a plan to stick with them. Having money goals gives you focus, control, accountability, motivation and a sense of achievement. Which is really the only way to live.

But what if you don’t really know what your financial goals are? How do you work out what you want? Here’s a step-by-step plan to figuring out what your money goals are.

1. Money goals start with money dreams

For the time being, ignore your current circumstances, if you can. Doesn’t matter what your current life looks like. Whether you own your own home, or how much money you make, or whether you have any savings or investments. It doesn’t even matter how much you think you could make. Just focus on what you really want.

If you could have anything in this life, what would you choose? You might find that you’re a “realistic dreamer“, or someone who keeps their feet firmly on the ground. You dream, but you like to keep your dreams achievable.

Or you might find yourself dreaming as wildly as the ten-year-old who wants to be the Prime Minister working from a yacht in the Whitsundays.

Both are good options right now. The main thing is to let your imagination go so you can really get to the core of what you value.

Useful tools for dreamers

A couple of useful tools for this stage of your money goals planning:

• Give yourself plenty of time – you need to relax, ruminate and really let your mind wander into every possible future
• Create a vision board – cut and paste images into a document that really inspire and delight you.
• Write a letter to Future You – sounds naff, but it’s a great way to solidify the kind of person you hope to become.

2. Focus on the ‘why’, not the ‘how’

Why do you like the life you are dreaming? Doesn’t matter how you’ll achieve it. Not yet.

If you focus on the why, you’ll start to really uncover what your values are. You may have that pipe dream of conducting important business from the back of your expensive boat, but why does that matter to you?

Work it through and you’ll soon realise that it’s not about the yacht. It’s more likely about comfort, luxury, power and style. And guess what, all of these things are achievable, even if the yacht is beyond the scope of many of us.

Some apps to help you figure it out:

• Lifetick
• GoalBuddy
• Milestone Planner
• Move Mountains
• Momentum

3. Write it down and get SMART about it

Once you’re settled on what’s important to you, write it down. Then you need to be SMART – that is, break your money goals down to be specific, measurable, achievable, relevant and timed. In other words, this is the stage where how you’re going to achieve your money goals becomes just as important as why.

You might stick with the yacht life story, and, no question, that’s a great goal to aim for. Just know that the how in this case means you may well have to give up some of your other money goals. So it might mean letting go of some of your other big whys and you’ll need to decide if this goals is worth giving up other goals.

Once you’re clear on your money goals, make them SMART. For our yachters, it might look like this:

Specific: I want to own and live permanently on a luxury yacht anchored in the Whitsundays with two full-time crew members by the time I’m 45.*

* Note that how you set your specifics can change your money goals considerably. For instance, owning a yacht that’s also your home is quite different to affording a yacht and a home.

Measurable: I’ll need to invest $X per month at X per cent in order to reach my goal in the next 12 years.

Achievable: I will give up X, Y and Z in order to find the extra cash I will need each month. I’ll do A, B, C to protect my dream from market fluctuations and other unpredictable circumstances.

Relevant: I really want to make this happen because I will feel a profound sense of achievement. It’s always been a dream of mine to be a luxury yacht owner and live that lifestyle. It will be worth the sacrifices I will need to make along the way.

Timed: I will have saved my deposit by 40 years old and live permanently on the yacht by 45 years old.

Be SMART about all your goals:

Everything Future You dreamed of doing needs its own SMART plan. That’s the only way to set money goals that you will actually go on to achieve.

Remember, the sooner you start working towards those goals, the better. If only one thing in your financial life is predictable, it’s this: no one ever regrets making their money work for them sooner, rather than later.

Read on to achieve your money goals:

• 10 steps to achieve your financial goals every time
• What a financial adviser does and why you probably need one
• 101 frugal tips to help you live a richer life
• 13 golden rules of investing
• How to create a personal finance plan in 45 minutes

This article contains general information only. It should not be relied on as finance or tax advice. You should obtain specific, independent professional advice from a registered tax agent or financial adviser in relation to your particular circumstances and issues.