How To Achieve Your Financial Goals: A Guide

The idea of setting strong financial goals for yourself is a good one, of course, but it’s also open to lots of interpretations. After all, just meeting your monthly obligations to pay for rent, bills, debts and groceries can sometimes be a struggle. If this sounds like you, just sustaining your lifestyle is an accomplishment.

But as part of a larger plan, setting and achieving your financial goals usually means saving money and building wealth to achieve larger things as you move through life, such as buying a house or even retiring comfortably in your later years.

In this sense, financial goals are tied to life goals, and they require planning, discipline and perhaps most of all, patience. Let’s examine how you can set and achieve financial goals that can lay the foundation for your entire life.

What Are Financial Goals?

Financial goals are benchmarks you set in order to better your life and save for future expenses, such as retirement. They can be short-term or long-term goals, and they typically include items like opening a savings account for emergencies, buying a house or paying off existing debt.

Not all of your financial goals can be specific, because you never know what the future might bring. A serious health issue, an addition to your family or an unexpected move are the kinds of things you should be saving for even though you can’t see them coming.

But there are things you should see coming and you know you want, and most will either qualify as short-term goals or long-term goals. Here are a few examples of each that you may already be thinking about:

Good Short-Term Money Goals: Examples

Short-term financial goals are things you want to accomplish in a relatively short period. Many people find it easier to stay motivated to work toward short-term goals. That’s because you’ll see the result of your actions much sooner than you will with long-term goals.

Also, accomplishing many short-term financial goals has the cumulative effect of strengthening your overall financial position, thus making your long-term financial goals more attainable. Depending on your wants and needs in life at any given time, here are some examples of good short-term financial goals worth pursuing:

• Buying a new car: If you need a reliable car on a daily basis – and most Americans do – a new car adds to your quality of life in a number of ways. First, it’s just fun to drive a new car. It makes you happy. It also provides the personal security of knowing you’re not going to break down and miss work, as well as the financial security of knowing that if there’s a major mechanical issue, it will likely be covered under warranty for the first few years.
• Saving for a vacation: Vacations are not only fun, but they’re necessary for good mental health. Whether you’re planning a big trip to Europe, or you just want to rent a cabin by the lake for a week next summer, you can easily set up a separate savings account and divert funds regularly until all or most of the trip is paid for before you even go.
• Paying off credit card debt: Bringing that credit card debt down to zero helps in two ways. First, when you no longer have to send part of your monthly income to service your debt, you can send it to savings instead. And second, making regular payments to a credit card company, along with lowering your overall debt, both contribute to a stronger credit score – which, as we’ll see, also helps you achieve the more ambitious long-term financial goals you should be thinking about.
• Home Improvements/Repairs: These expenses can fall into two categories: the fun and the not-so-fun. The fun ones, like a kitchen renovation, you can plan for. You’ll have a good idea of how much it’s going to cost, and you can start saving for it. But homeowners also know, or they will learn, that unexpected, expensive, and very un-fun issues can come up suddenly. Whether it’s a crack in the foundation, a furnace gone kaput or a leaky roof, necessary repairs requiring immediate attention are almost inevitable.

Good Long-Term Money Goals: Examples

Long-term goals are things you’re trying to accomplish over a longer period, like making a significant down payment on a house or saving for retirement. These goals can involve the acquisition of things, in some cases, but they are also about the accrual of wealth in general.

It can be harder to maintain the discipline needed to achieve long-term financial goals because they can take many years to reach. If you set a goal for your total net worth needed to retire, for instance, it might seem impossible if you’re starting with just a few thousand dollars.

But if you invest your money wisely, whether in stocks, bonds or real estate (preferably in a professionally managed portfolio that includes all three), you’ll find that growth can be exponential and quite dynamic. A well-known financial axiom called The Rule of 72 shows that most investments that earn an average of 10% annually will double in value about every 7 years.

Under the Rule of 72, you divide the number 72 by the expected annual return of your investment. So, if your IRA averages a 10% gain of compounded interest annually, you should see your balance double after 7 years (72 ÷ 10 = 7.2).

Here are some long-term financial goals you can never start aiming too early for, even if you’re just starting in your career:

• Retirement: Remembering the Rule of 72, you’ll know that investments grow exponentially. The larger your balance, the larger the gain every 7 years, so it literally pays to start young. Save as much to a well-managed IRA as you can. Even better, save the maximum allowed to your company’s 401(k) – these are pretax dollars, and your employer likely matches a percentage of your contribution.
• Down payment on a house: While it’s possible to get approved for a mortgage with as little as a 3% down payment, you’ll get a much better interest rate and terms if you can put down 20%. This means that for a $300,000 house you’ll need to bring $60,000 to closing. And remember, even though it will be tough to part with that kind of cash, you’re really not. It remains as a personal asset in the form of equity in your home.
• College fund: If you have children and would like to send them to college, you should have a good idea of how much it will cost. A recent study found that the cost of one year’s tuition at the average American four-year college was $19,800  and that’s for a commuter college. Add in the cost of a room, dining hall, books and supplies and that figure jumps to more than $36,000 a year or close to $150,000 for 4 years of college. See if your state is one of many that has a tax-protected savings program that can be applied to their state university system.

How To Set SMART Financial Goals

One popular and successful strategy for setting strong financial goals uses the acronym S.M.A.R.T.

• S – Specific: I want to lease a new car in 6 months and I need $1,500 for a down payment.
• M – Measurable: In order to achieve my goal, I’ll need to send $250 each month to a dedicated savings account for my new car ($250 x 6 = $1,500).
• A – Achievable: Be realistic in setting a goal that you can achieve. The $250 I need to save each month is discretionary money that I normally would spend on things I don’t need (such as at the casino), rather than things that I do need (such as rent).
• R – Relevant: I need a reliable car for my job, and the one I currently have is always in the shop.
• T – Time-bound: Start with smaller, short-term goals. If you can track your progress toward achieving a financial goal, you get the satisfaction of seeing your sacrifice quickly come to fruition, which helps with motivation.

Another popular financial strategy is the 52-week money challenge. It’s a fun and low-stakes challenge that’s especially effective in helping kids and teens learn the value of savings with their allowance or first-job income. The idea is to begin by saving a small amount of money, increasing the amount saved each week until the end of 52 weeks. One of the most popular ways is to start by saving $1 in the first week, and increasing the savings amount by $1 each subsequent week.

So, you’ll deposit $1 into your savings during week 1, $2 during week 2, and so on, until you reach week 52 and deposit $52. Your total savings over the 52 weeks should total to $1,378. That’s a nice savings for anyone, but especially a young person, and it teaches them a valuable lesson about how rewarding strong financial goal-setting can be.

The Rocket Money^SM  app has multiple tools to help you set realistic financial goals and track your progress instantly. Rocket Money also participates in the America Saves campaign led by the nonprofit Consumer Federation of America organization. In 2022, Rocket Money helped consumers establish a savings goal of $15 million and initiate over $569,000 in new and existing savings transfers.

Common Financial Goals To Consider

Different people will have different financial goals or milestones. Some of the more common goals may be nearly universal, some may never apply to you and others might be things you’ve never considered but should start thinking about now. Here are some common financial goals people like to set for themselves at different periods of life.

Emergency Funds

Especially if you’re a young person who has just left home and you’re trying to support yourself entirely for the first time, the idea of an emergency fund might not be on your radar yet. Rest assured that it will be soon, because life has a way of creating sudden, unexpected expenses that might rock your budget for a while. These can be things like a car repair, medical expense or job loss.

Of course, if any of these things occur, it can impair your ability to pay for your existing, known monthly expenses such as rent, bills and loan repayments. Many financial advisors suggest that you build an emergency fund that would cover all of these expenses for at least 3 months to cover for a large, calamitous emergency expense.

Retirement Funds

You may not think about retirement now, but by middle age most people begin to look forward to the day they can stop working. Unfortunately, it still costs money to live even for retirees. And even though you can expect to collect on your Social Security benefits in your 60s, it’s unlikely that the amount you receive monthly will be enough to let you live the way you’d like to live.

The best way to save for retirement is to start young, set up a professionally managed IRA, contribute aggressively to your employer’s 401(k) plan and never touch those funds until you’ve retired unless it’s an absolute emergency. Remember, even if you start out small, a smartly invested retirement fund can double every 7 years.

Debt Repayment

Debt, particularly high-interest credit card debt, can be a major drag on your financial health and last for decades if you don’t get a handle on it. Not only does it take away from your monthly budget, it also continues to expand the longer it exists.

That’s why paying off your debt is one of the best financial goals you can set. Pay down the highest interest loans first, and once you’ve eliminated the debt, take steps to make sure you don’t get under water ever again. Limit yourself to a single credit card, for example, and only use it for emergencies.

Savings For Large Expenses

No way around it – if you want nice things in your life, it takes time and discipline to save enough to afford them. Here are some common niceties that require an aggressive savings plan:

• Buying a house: The average first-time buyer pays about 6% of the home price for their down payment, according to data from the National Association of REALTORS^® in late 2022. The median home sale price in the U.S. was $416,100 as of Q2 in 2023. So a 6% down payment for that house is about $25,000 (plus a few thousand more in closing costs).
• Getting a new vehicle: For a new car or even a good used car, it’s likely you’ll need to get a car loan to help pay for it. If you can make a sizable down payment – about 10% for a used car or 20% for a new car – you’ll likely qualify for a much better rate and terms on your loan.
• Buying a boat: Similar to a car loan, most boat lenders offer better rates if you’re able to put at least 10% – 20% down.
• Setting up a 529 plan for kids’ college expenses: In 2024 dollars, the cost of 4 years of away-from-home college averages about $150,000. It’s never too early to start saving. A 529 plan, or qualified tuition program, is a tax-advantaged savings plan into which you or a family member can contribute or invest money for higher education. These plans are set up and monitored at the state level, and money taken out of these accounts is tax-free as long as it’s used for educational purposes.
• Financing a much-needed vacation: Yes, vacation is fun, but don’t think of time away as an indulgence. It also reenergizes you mentally and physically and makes you a better employee and person. But if you don’t save for vacation, months and even years can go by before you can afford a nice trip. Set up an automatic transfer from your bank account to a dedicated vacation fund and don’t touch it.

FAQs On Financial Goals

While the financial goals that are right for you may be different from goals set by someone else, there are some types of financial goals that are common. Here are a few common questions that people ask about financial goals.

What are good financial goals?

In the context of setting specific goals, refer back to the SMART acronym. When you're looking at setting financial goals, try to specify them so that they fulfill each of the five characteristics. For example, if your goal is “pay off my credit card debt,” a better SMART goal would be to “pay off my $1,000 credit card debt by paying $200 a month for the next 6 months (assuming some added interest).”

What’s a milestone goal?

Financial milestones are goals that can be a part of an overall plan to reach several goals in succession. For many, good milestone planning begins with paying off all debt. It then lays a multipronged savings program that includes several goals, such as building an emergency fund, paying for a down payment on a house and growing wealth for retirement.

What’s a good personal financial plan?

In terms of an overall strategy, a good personal financial plan is the 50/30/20 rule. The 50/30/20 rule divides your income into three categories: 50% for needs (rent, bills, loan payments, groceries), 30% for wants (entertainment, dining out, vacations) and 20% for one or more savings plans and extra debt repayment.

The Bottom Line: Financial Goals Help Improve Your Life

Big financial goals that can enrich your life, such as buying a house or building a retirement fund, can seem impossible to accomplish for some. But they are very attainable to anyone who is willing to set a realistic budget, save money, invest wisely and maintain good financial discipline for months and even years. It’s easy – and can even be fun – if you track your spending and saving with the Rocket Money^SM app.