How to Set Financial Goals (Part II)


Earlier this week I rambled on about the importance of setting goals. And now onto the nitty gritty — the actual goal setting!

When Johnny and I are setting short-term and long-term goals, we always flesh out the long-term goals first. And how do we do that? Well we ask ourselves a few questions, the very first of which is What’s our end game? This question is a favorite for Johnny and me because it helps us focus on the finish line. Our answer to this question would sound a little like this:

We’ll be able to retire and have financial independence, such that we’re able to enjoy some of the fruits of our labors (literally — our children and our grandchildren). We’ll still have some form of money that’s working for us, whether it’s through investing, rental properties, etc., so we’re not relying on a lump sum of money to get us through our retirement years. 

Well, once I write it out, I realize just how boring our end game sounds. Geez. Sorry, no dreams of sailing around the world. I’m sure we’ll do some exciting stuff (all our kids tattooed on Johnny’s chest, perhaps?), but the specifics are yet to be determined. What matters is that we have a general idea to work toward.

The next step is figuring out how we’re going to get there. And so onto the long-term goals, which in our mind is anything that’s more than a year away. Here are some of ours:

Long-Term Goals

  1. Buy a house with a significant down payment.
  2. Own our future house outright.
  3. Buy a second car with cash. (Sorry, Vespa, you don’t count.)
  4. Save enough money to pay for our children’s college education.
  5. Travel abroad.
  6. Have multiple streams of cash flow.

Your long-term goals may be more or less specific than ours. Maybe you want a very specific kind of car or house someday. Maybe you want an exotic puppy or some kind of plastic surgery. No judgement here. If you’re having a hard time coming up with your long-term goals, here are some other ideas:

  • Live in [insert incredible vacation spot here].
  • Pay cash for a [expensive sports car].
  • Be able to support parent/grandparent/sibling financially.
  • Pay off school loans/mortgage/credit card.
  • Open my own business.
  • Quit my job.

Really, with long-term goals, the sky is the limit. But Johnny and I only list items that we truly intend to accomplish someday. Long-term goals are our dreams that we are 100% set on making into realities.

Once Johnny and I had set those lofty goals, we had to come back down from the clouds and focus on the task directly in front of us, which is where our short-term goals come into play. And without further adieu…

Short-Term Goals

  1. Stick to our budget this month.
  2. Save up an extra $25k in 2013.
  3. Open up a Roth IRA (we actually already did this one recently!).
  4. Start a 529 College Savings Plan for Baby Girl (this should have happened many months back).
  5. Buy life insurance.
  6. Find a cheaper cell phone plan.

So there ya have it. Short-term goals are pretty much anything we’re working towards this week/month/year that involves our finances. Your short-term goals could be similar to these, or very different. Here are some other possibilities:

  • Find a job that pays more/ask for a raise.
  • Pay off my credit card.
  • Find a cheaper apartment to live in.
  • Quit giving money to [insert friend/relative here].
  • Start a budget/refine my budget.
  • Find freelance work.
  • Cancel cable.
  • Open up a joint checking account with my spouse.

Once Johnny and I were clear on our short-term goals, it became easier to stick to our budget. We don’t want any expenses that could jeopardize reaching our short-term goals. Really, the short-term goals are the building blocks of financial success. They may seem insignificant. But when we stick to them day after day, our financial outcome will be a complete 180 from what it would be if we didn’t stick to them. So short-term goals deserve a hefty pat on the back because they’re pretty cool.

What are some of your short-term and long-term goals? Are they similar or different from our own?

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  • Reply Michelle September 12, 2013 at 8:21 am

    We are now working on saving as much money as we can for our down payment for our next house. We are in no rush though, but it is a goal of ours!

  • Reply Keren September 12, 2013 at 8:40 am

    If you don’t have goals, what are you working for?

  • Reply Becky @ RunFunDone September 12, 2013 at 9:49 am

    Another thing that I have found to be important is to make goals as specific in possible, not just in numbers (e.g. “save $500/month for a house), but also in determining what you’re saving for (e.g. “I’m saving for a house built in the early 20th century with hardwood floors in this specific neighborhood…”). The reason being specific is important is because it keeps you inspired! If you’re just saving for “a house,” it won’t keep you as excited as it would if you were imagining what the house would be like.

  • Reply Heather September 12, 2013 at 10:26 am

    I’m thinking pretty short term right now because I’m still paying off debt. So, my only financial goal right now is to be debt debt free by my 34th birthday (December 2014). As long as I stay on budget and still have my job over the next year, that will happen by September 🙂 I’m in a pretty good place with a 5 month emergency fund and still locking a bit into an RRSP (retirement) every month, so I feel like I can just focus on getting that debt down over the next year.

    But, my other goal is to learn about mortgages and retirement planning, so that once the debt is paid off, I decide what I want in the future, and be smart about planning for it. My needs are pretty basic, though – if it’s still just me, I don’t think I’ll be investing in a house or anything massive!

  • Reply E.M. September 12, 2013 at 12:35 pm

    My goals are very similar to yours! I loved the description of your end game. I would love to be able to travel, have multiple streams of income, pay for my next car with cash, and save up for a downpayment on a house someday. Moving is in our short-term list, though we might not be able to make it happen until the middle of next year. Along with the move, I am hoping to get a higher paying job or at least explore more opportunities. There probably won’t be any question about getting a cheaper apartment, since the area we want to move to is a much lower cost of living place. My biggest longer-term goal is paying off my student loans. Good luck on your goals!

  • Reply Meghan September 12, 2013 at 8:43 pm

    1. Put one month of rent aside for an emergency (stable job): $1600
    2. Save up for lease break fee for old place my Mom is currently living in (long story) $1900
    3. Save up for deposit and mover for April $2000 (new to city but would like to live roommate free in 2014 in VA, not DC)
    4. Save $6000 for car and $700 for insurance / plates?

    All by April?

  • Reply Erin @ Red Debted Stepchild September 13, 2013 at 2:42 pm

    I was just working on some goal setting last night! I’ve been missing direction lately and I’m trying to put words to what I want.

    Here’s where I’m at:
    I want to crank through my credit card debt and highest interest student loans in 2014 while also fully funding our (my husband and I) Roth IRAs. In 2015, I want the option to start talking about starting a family in 2015 or 2016, but I don’t feel like I can responsibly do that without first significantly slashing our debt load.

    Long term, I would like to put at least 20% down on a home in our “forever” place, wherever that may be, save for our retirement and our kids’ education, and travel regularly as a family. I have no idea where I want to be career-wise, hence, the “I’m lacking direction”.

  • Reply GetRichWithMe September 13, 2013 at 5:14 pm

    Love the way you break things down into long and short term goals . small steps turn into big strides

  • Reply Well Heeled Blog September 15, 2013 at 10:13 am

    Short-term goal: graduate MBA debt-free (next year). Medium-term goal: put husband through grad school debt free (+3 years). All the while maxing out Roth IRAs for both of us and 401K for me.

  • Reply sarah September 19, 2013 at 7:44 pm

    i took a massive pay cut from my last job to my most recent job but it was well worth it. i am so much happier and my comute is half of the distance and time (so i guess im saving money there, right?)
    i wasn’t willing to sell my time anymore for that particular job so my short term and long term goals had to be adjusted

    short term is maintaining my new budget while not using my credit card for any purchases.
    long term is to pay off my credit card debt. i set up my paycheck to go 26 weeks instead of 21 (one of the perks of being a teacher) so while my paychecks seem much smaller on a weekly basis, i will be able to take the summer off from work and not have to worry about a part time seasonal position

  • Reply Slinky September 27, 2013 at 5:05 pm

    I just got a cheaper cell phone plan too! I switched from sprint to ting. Not sure what carrier you’re using now, but let me know if you want a referral. Loving it and my bill is less than half what it was on Sprint for little to no change in usage.

    Otherwise, we’re working on getting my husband self employed right now. I’m saving up a nice emergency fund and he’s saving to restore the building his forge is going in. (We use separate finances, but work together on everything.) Hopefully we’ll be ready to make that switch in the next year or two at most.

  • Reply Melanie October 8, 2013 at 9:05 am

    Did you write a blog post on the Roth IRA? I’m taking Financial Peace University right now and I want to open a Roth this month… I checked out Bank of America’s costs. Some people suggested Vanguard, Schwab, etc… can you guys either respond to my post to suggest a company to me, or may I suggest that perhaps it could be a future blog people might find interesting! 🙂

    • Reply Johnny October 14, 2013 at 1:49 am

      Not yet! But one is definitely in the works. The short of it is that I used our existing ShareBuilder account (since I already had a few investments there, anyway) but it’s currently all invested in a Vanguard 2050 Target Fund. That being said, I could (and maybe should) have just done it through Vanguard directly since the fees are a little cheaper. In the end though, I wanted the flexibility to invest in things outside the Vanguard family, so I went the ShareBuilder route.

      Keep an eye out for a post in the next week or two.

  • Reply Douglas R. Hodgins January 29, 2014 at 3:26 pm

    Setting money and financial goals is an interesting exercise Joanna.

    You’re absolutely right about setting long-term goals first.

    You need to dream a little to become aware of your possibilities.

    You can narrow your goals later and make them S.M.A.R.T.. specific, measurable, attainable, relevant and time-bound.

    For more ideas on how to articulate both short-term and long-term financial goals read this article:

  • Reply The MDRMoney Top 10: How To Set Money & Financial Goals | MDR Money January 29, 2014 at 4:18 pm

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  • Reply She-Ra June 10, 2015 at 7:04 pm

    Just did this exercise with hubby last night and our long term goals are pretty straight forward, build up savings to $10K, Get out of debt, save for family reunion/vacation summer 2016 and a handful of jobs around the house that cost more than we an afford right now. But our short term goals are out of control. We have a few that will save us time (which is money for us at times!) and money, but of the ones that will cost us, I’m looking at 13 items. It’s sort of overwhelming. How do you break it down from there? Highest to lowest (some we don’t know until we’re ready to buy) or earliest to latest? Or move some over to long term? I guess I’ll have to play around but any ideas would be appreciated.

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