Financial goals: How to set and achieve them

When people are asked about their "financial goals," they often provide a list of items they plan to purchase or things they plan to do, such as buying a new car, making a down payment on a house, or saving for college. But there’s another way to think about financial goals: there are overarching financial benchmarks that can help you to achieve the financial stability you may want from life — and ultimately, help you get and do the things you want in life. Most people wouldn't set out on a road trip without a solid idea of how to get there. Financial goals serve a similar purpose, helping you to navigate your financial journey through life. In this article, we will provide easy-to-understand examples of financial goals and explore practical examples tailored to people at different life stages. We’ll tell you about:

• The SMART method for setting financial goals

• Examples of short-, medium-, and long-term financial goals

• Specific steps to achieve goals and increase financial stability through retirement and beyond

The SMART way to set financial goals

Almost everyone has daydreams about vague and even romantic life goals. But one key to realizing goals is by making them as specific and achievable as possible. That’s why many financial professionals recommend using the SMART formula for setting goals that are Specific, Measurable, Achievable, Relevant and Time-bound:

• First, be specific about what you want to achieve and your timeframe for doing so. Set goals such as "paying off $1,000 of credit card debt within three months," “investing $10,000 each year for retirement,” or “saving a $50,000 home down payment in five years.”

• Make sure that your goals are achievable based on your current financial situation. If your monthly after-tax income is $8,000, and half goes to needs like rent, food and transportation, you're not going to have the financial resources needed to save $5,000 a month.

• Ask yourself if each goal is relevant to your overall life plan and aspirations – and be prepared to prioritize the things that are most important.

• Finally, make sure your goals are measurable. It may not be enough to say, "I want to have enough money to retire on"; you should try to quantify how much money you'll actually need to do that.

Financial goals should provide specific benchmarks against which progress can be measured, showing how far you have come toward achieving your objectives. Applying the SMART formula can help create a clear financial roadmap that increases your chances of meeting your goals. It can also help provide a solid foundation to build a budget that will work today, along with a savings plan that will prepare you for tomorrow.

Short-term financial goals: Start taking control of your money

These short-term financial goals include items that can be achieved over the course of the next 12-24 months. They can help improve your day-to-day financial stability, and, most importantly, help you create a foundation on which to build a financial future with confidence. Here’s how to make them real:

1. Build an emergency fund

• Start by calculating a target amount for your fund. Review your last 12 months of essential living expenses (i.e. housing, utilities, food and groceries, transportation) to figure out a monthly average. Start with a target of 1 month essential expenses, then

  work your way up to a fund that amounts to 3–6 months of essential living expenses.

• Create a separate high-yield savings account for your emergency fund, then automate savings with recurring transfers or split direct deposit, so a fixed amount flows into it every payday.

• Start with micro-goals (like building up to your first $500) and small, regular contributions to build the savings habit, then increase as income or budget allows.

Example: Save three to six months of living expenses to cover unexpected costs.

2. Pay off high-interest debt

• Start with a list all your credit card and personal loan debts, which tend to have higher interest rates than things like a mortgage or standard auto loan. Prioritize what to pay first, using either the avalanche method (highest interest rate first) or snowball method (smallest balance first), while paying minimums on others.

• Look for temporary help such as 0 percent APR balance transfer offers, but make sure to pay them off before the promotional period ends (and check any associated fees to make sure they are reasonable).

• Boost payoff speed by trimming nonessential spending, using tax refunds and bonuses for extra payments, or by adding side-job income.

Example: Reduce (or eliminate) interest costs and improve cash flow.

3. Create and stick to a budget

• Use a simple framework such as the 50/30/20 personal or household budget (50% of income for essential needs/30% for wants/20% for savings).

• Consider using bank apps or spreadsheets to track spending and manage money; set realistic category limits and adjust monthly to address imbalances.

• Adopt the “Pay yourself first” savings method: scheduling debt payments and savings contributions right after payday, then live on what remains.

Example: Track income and spending to identify priorities, cut waste, and free up funds for saving.

4. Establish a bill payment system

• Set autopay for at least minimums on all fixed bills and debt payments to avoid costly late fees and dings to your credit score.

• Use calendar reminders or budgeting apps to track due dates for any bills you do not automate and to verify payment amounts.

Example: Set up autopay or reminders to avoid late fees and protect your credit score.

5. Start or increase retirement contributions

• Make sure you are enrolled in your workplace retirement plan and contribute at least enough to capture the full employer match if offered — it’s like “free money” that grows tax-free every year until you retire.

• Set an automatic annual increase (for example, 1 percent more each year, or whenever you get a raise) so contributions grow without requiring new decisions.

• If you are self-employed, or your employer doesn’t offer retirement benefits, open an IRA (Individual Retirement Account) to get the same kinds of tax-advantaged savings as a workplace 401(k) plan.

Example: Contribute to an individual or employer retirement plan to save on taxes and get compound growth.

Medium-term financial goals: The next steps to building a confident future

Once your day-to-day finances are in better shape, start looking ahead to the foreseeable future — about 1-5 years out — and set goal that can strengthen your finances while helping you achieve the lifestyle you want.

1. Save for a major purchase

• Identify a specific item (such as a car, home renovation, wedding). Do some research to set a realistic total cost, and set a specific SMART goal with a monthly savings targets and end-date deadline.

• Use a dedicated high-yield savings account or short- to medium-term CDs aligned with your timeline (for example, 1–3 year CDs for a purchase a few years out).

Example: Set aside funds for large expenses such as a new vehicle, wedding, or home renovation.

2. Build an investment portfolio

• Look at ways to grow your wealth and outpace inflation over time with investments that produce higher average yields than a savings account.

• Rather than trying to pick individual stocks, start with automated monthly contributions to broad, low-cost index funds or ETFs with relatively lower volatility and investment risk.

• Since higher returns usually mean greater risk, take some time to learn about the markets before you begin, or consider consulting a financial advisor.

Example: Consider options like stocks, bonds, and ETFs to grow wealth and outpace inflation over time.

3. Improve your credit score

• Avoid making minimum payments (except as part of your high-interest debt repayment strategy; see above).

• Make all payments on time, ideally via autopay, and keep your credit line usage below 30 percent of available limits, with lower usually being better.

• Avoid opening many new accounts in a short period, check your credit reports for errors, and consider a secured card if rebuilding from past problems.

• Having a diverse mix of credit accounts — not just credit cards but things like student loans, personal and automobile loans, and a mortgage — may help build credit faster, assuming all accounts are in good standing and not maxed out.

Example: Pay balances on time, reduce credit usage, and check reports regularly to qualify for better loan terms later.

4. Reduce or eliminate student loans

• Choose a focused strategy (standard, refinance, or an income-driven plan if appropriate) and direct any extra cash to one target loan at a time.

• Reevaluate annually for refinancing opportunities with lower interest rates once your credit and income improve.

Example: Focus on paying down educational debt to free up income for other financial priorities.

5. Purchase life and disability insurance

• Protect the financial well-being of your spouse, partner, or children who depend on your income with life insurance, which can pay a significant, income tax-free death benefit to your dependents if you unexpectedly pass away.

• Don’t put it off: Typically, the younger and healthier you are, the more likely it is to be approved for life insurance and the lower your premium may be.

• Since your ability to work and earn income is likely your most important financial asset, consider disability insurance which can replace a portion of your lost income if you cannot work due to a covered illness or injury.

• Many employers offer short-term disability coverage as an employee benefit, and some also offer the opportunity to purchase long-term disability insurance at a group rate.

• If you're self-employed or your employer doesn't offer it, you can purchase disability coverage from an insurance company such as Guardian.

Example: Protect against major threats to your family’s income and lifestyle.

Long-term financial goals: Building wealth and assets over time

Long-term financial goals typically extend beyond five years and are essential for achieving financial independence, long-term financial security, and building substantial wealth over time. For most people, long-term financial goals can include creating a secure retirement, funding children’s college educations, or saving for other large purchases like a vacation or retirement home. While those objectives may be far in the future, the sooner you start planning and saving, the better. With any luck, you’ll also find that after years of practicing good financial habits you’ll accumulate substantial assets. So you’ll also want to create an estate plan to help ensure those assets are used in accordance with your wishes, even after you’re gone. Here are some ways to start making those things happen.

1. Purchase a home, a second home, or rental property

• Start with a target price range for your property. Then, set a SMART savings plan to get to the required down payment and closing costs.

• Strengthen your borrowing profile by maintaining a strong credit score, maintaining stable employment, and lowering your debt-to-income ratio before applying for a mortgage.

Example: Work toward a down payment and financing for a personal home or rental income property.

2. Pay off mortgages or long-term loans

• Cut years off the repayment term by adding small, consistent extra principal payments (for example, by adding $100 or more to each payment); or, use year-end bonus money to make one extra payment per year.

• Refinance if and when rates and closing costs make sense then keep paying at the old payment amount to accelerate payoff on the new lower-rate loan. Or, consider refinancing to a shorter term (e.g., if you have 20 years left on your mortgage, refinance with a 15-year loan).

Example: Aim for debt-free living to reduce monthly obligations and increase financial freedom.

3. Reach full retirement funding targets

• Estimate your retirement income needs and set a target savings rate, then maintain steady contributions over the years to take advantage of compound growth.

• Diversify across tax types (e.g., traditional and Roth accounts) and consider mixing investment portfolios with cash value life insurance, and as you near retirement, guaranteed income products such as annuities.

Example: Consistently save and invest to ensure financial independence and comfort in retirement.

4. Plan for children’s education

• Use tax-advantaged accounts such as 529 plans and set up automatic monthly contributions from birth or as early as possible.

• Periodically review and adjust investment allocations from more aggressive to more conservative as college approaches to protect against market swings.

Example: Use tax-advantaged accounts (like 529 plans) to prepare for college expenses.

5. Create an estate and protection plan

• Work with an attorney or other qualified professionals to draft wills, powers of attorney, and, if appropriate, trusts that match your family and asset situation.

• Review life, disability, and long-term care coverage as wealth grows and family circumstances change, updating beneficiaries and documents every few years.

Example: Establish wills, trusts, and insurance coverage to protect loved ones and preserve assets.

The sooner you begin saving for long-term goals, the more likely they are to remain achievable, instead of turning into unreasonably large short-term goals. Creating a plan for long-term financial success — and sticking to it — can help make your life's financial journey smoother and easier. And remember, if you need guidance along the way, consider reaching out to a financial professional.

Guardian can help you reach your financial goals

Setting financial goals is one of the first steps in your financial journey. If you need guidance moving forward — on issues such as a retirement strategy or using life insurance to protect your family’s future — Guardian can help. To find a Guardian financial professional near you, just fill in your zip code and click below.

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