Setting Financial Goals For Your Future: The Definitive Checklist


Setting financial goals is crucial for anyone who wants to secure their financial future. That doesn’t necessarily mean becoming wealthy. Though it’s certainly a key part of the process if you do want to achieve whatever your own personal definition of ‘wealthy’ is. Goal setting is simply the most effective route to making sure things happen. It might sound a bit ‘self-help book-ey’ but the reality is ‘goals setting’ is something we do each and every day. It’s just that we don’t often use the word ‘goal’.

An everyday example of the power of goal setting is going out to socialise on a wet, windy evening. If a friend or family member has prearranged a meet-up and you’ve accepted the invitation the chances are you’ll grit your teeth, put on your jacket and head out into the elements. And you’ll be glad you did when you come home at the end of an enjoyable evening.

However, in the alternative scenario that you have returned home for the day and the same person calls or sends a message suggesting a meet-up, it is much less likely you’ll accept and venture out. You’ll look out of the window, see the weather, feel the day behind you and if you are of an average disposition to socialising there’s probably a higher than even chance you’ll decline.

Why? In both cases your effort to reward ratio is actually the same. The difference between the two scenarios, and the likelihood of you making the effort to reap the rewards of the social meet-up, boils down to you having set a goal in the first scenario. You made a commitment to yourself and other you will attend. In the second scenario no goal had been set so it is a lot easier to take the easy option. You don’t lose any face in front of either yourself or the organiser.

We set those kinds of informal goals every day. They stop us being lazy and putting off higher goals such as ‘earning enough money to live well’, ‘having a strong social/family circle’ and ‘staying fit and healthy’, we know are good for us as part of the bigger picture. Without these goals, instead of acting on ‘get qualified, go to work and do something productive while there’, ‘keep in touch with friends and family’ and ‘go for a run or workout’, it would be too easy to fall into ‘sit on the sofa, watch TV and eat crisps’ which would achieve the lower order goal of ‘relax’.

Setting financial goals is exactly the same. Without financial goals it’s easy to fall into the trap of the financial equivalent of sitting on the sofa and eating crisps. Which would be something along the lines of ‘buy that tshirt, top or gadget as I like the look of it and it will give me a confidence boost/enjoyment/satisfaction now’.

Choose Your Own Financial Goals

Just like starting a project at work, the first step towards setting yourself a good set of financial goals that fit your personality and what is important to you is to brainstorm. Just go nuts and write down everything that comes into your head that could just about be considered a financial goal. But keep focused on things or situations you want to have and not strategies for how to achieve that. At least not at this stage. For example:

  • Be able to afford a holiday to Peru/Spain/Bognor Regis in six months.
  • Have £3000 to buy a car.
  • Be able to afford the clothes I think are necessary for me to look and feel good.
  • Be able to put a deposit down on a property.
  • Be able to furnish my first property after I buy it.
  • Have £10,000 to put towards my dream wedding.
  • Be able to pay my kid(s)’s university fees and rent.
  • Have a reliable £40,000 annual income during my retirement.

Don’t limit yourself. Think near term, middle term and long term and write down absolutely everything you can think of. Now it’s time to categorise all of your financial goals into near, medium and long term. New clothes and a holiday in the summer would be near term, a deposit for a property medium term and putting kids through university and a comfortable, reliable income during retirement long term.

Prioritise Your Financial Goals

Once you’ve placed your financial goals on a time line, it’s time to start placing them in order of priority. You can categorise everything you want to be able to financially afford yourself as:

  • Requirement
  • Priority
  • Important
  • Nice to have
  • Luxury

How exactly the categories are named and how many you want to split your financial goals between is less important than the fact you do break them down by order of priority. Be tough when categorising your financial goal priorities but also realistic. There’s no point in setting financial goals that mean you have to live so frugally you deny yourself any joy in life in the meanwhile.

A retirement income of x a year might be considered a priority but perhaps it’s really ‘important’ or a ‘priority’. A slightly lower figure might be a ‘requirement’. Also, 5 holidays abroad a year might be a luxury. But it’s ok to put 1, within a reasonably budget, as a priority or even requirement. Again with clothes. Spending £5000 a year on clothes might be a luxury but £1000 might be a priority or requirement. Depending on your job you might need to look smart at work and showing up in clothes full of holes won’t help your long term earning potential. It’s about reasonable balance. Cutting the fat.

Think of it like exercise and dieting. To be successful, financial goals setting has to be sustainable. You might be able to save half your monthly income to achieve a £1 million pension pot on your current income 25 years from now. But if doing so means never socialising, never going on holiday, never buying new clothes etc. etc., is there any chance you will keep it up? Almost certainly not and you’ll probably also have lost the will to live long before you reach retirement.

Once you have put your goals in order or priority it’s time to dig into the details of going about achieving them.

Creating a Budget

It’s time to make your budget. You should create a detailed list of all of your financial incomings and outgoings on a monthly and yearly basis. Both are necessary as some expenses, like holidays, new clothes etc. may not be every month. Be as complete as you possibly can as all the little things you spend money on that may not immediately spring to mind are likely to add up to a significant sum over the course of a year. As well as your initial budget it will probably help to track your incomings and outgoings on a monthly basis over a year to get a more accurate picture.

Based on your current budget you will see what, if anything, you should have left at the end of the month to put towards medium and long term financial goals. You should now also calculate how much you will need to save per month to achieve them. That may well prove to be a shock. From your monthly budget you’ll have to see where you can realistically cut back. Choose things that might be a challenge but not things that will make you miserable and aim to cut fat rather than eliminate entirely, unless you feel something really is a waste of money and on reflection brings you little benefit.

You should then have a realistic idea of how much you can save every month towards your financial goals based on your current income. If it isn’t enough to achieve them, you have three options.

  1. Is there more unnecessary monthly spending you can cut back while still enjoying life?
  2. Can you reprioritise your financial goals by either downgrading them slightly or deciding some are not so necessary after all?
  3. Can you realistically increase your income now or over the next 2, 5 or 10 years? Add realistic steps how you will do so such as adding professional qualifications to your skill set etc.

You can set your immediate short, medium and long term financial goals based on your current income. Then add adjustments you will make as you succeed in increasing it over the years.

With all of the above in place you should be well placed to meet and hopefully even potentially exceed realistic financial goals. Even if some short to medium term cuts are necessary to your unnecessary expenditure, gradually removing financial stress and restrictions from your life will allow you to enjoy more fully long term.

About the author

Kate Leaman

Kate Leaman

Kate Leaman is the Chief Analyst and author at InvestorGreg. She won the Sky News Fiona McDiarmad award and subsequently became a journalist for Sky News. Read more

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