Lesson How to set up financial goals

How to set your first financial goal

Setting your first financial goal is a pivotal moment that can lead you toward a more secure and fulfilling future.

couple chatting in a car

Imagine getting into your car for a road trip without a destination in mind. You might have a full tank of gas and plenty of snacks, but without knowing where you're heading, you could end up lost and feeling unfulfilled. Similarly, putting aside money without setting a specific goal can leave you wandering aimlessly, making it challenging to stay motivated, disciplined and focused. 

With that in mind, here's a step-by-step guide on how to set your first financial goal.

1. Define Your Dreams

Saving and investing are essential steps to achieving financial independence and peace of mind, but what do you actually want to achieve? Do you want to own a home, start a business, travel the world, retire comfortably, or pay for your children’s education? Take time to visualize your ideal financial future and what it means to you. Then, write down your goals and be intentional about what you want to accomplish.

2. Determine Your Priorities

If you have multiple goals, prioritize them based on your values and urgency. Consider which goals are short-term, medium-term, and long-term. Prioritization will help you allocate your resources and efforts efficiently.

3. Make Your Goal Specific

Once you have a clear picture of your financial dreams, it's time to make them specific. Vague goals like "I'm saving for the future" won't give you a clear direction or a sense of achievement. Instead, you can make your goal specific, measurable, achievable, relevant, and time-bound (SMART). 

For example, "I want to save $35,000 for a down payment on a house within x years by setting aside x amount per month.”

Part of making your goal realistic is to be mindful of your current financial situation, income, expenses, and any potential changes in the future. Understanding your financial standing will provide a foundation to create a feasible plan to achieve your goal.

4. Create a budget

It's important to develop a budget that aligns with your financial goals. Not only will tracking your income and expenses help you identify areas where you can cut back, it can also help you allocate funds towards your goal effectively.

5. Break it down

A big financial goal might feel overwhelming at first. To make it more manageable, break it down into smaller milestones.

Let’s use the down payment example above. If you want to save $35,000 in 5 years, how much would you need to save per month? How much extra income would you need to meet your target on time? When you reach your yearly goal, how will you celebrate each milestone? 

Making adjustments might be necessary based on factors out of your control, like interest, unexpected expenses, and changes in income. Breaking down your goal into smaller parts will allow you to adjust your plan along the way.

6. Adjust as needed

Setting a financial goal is the first step, but staying committed is equally important. Life might throw curveballs your way, and your circumstances or priorities may change. Be adaptable and willing to adjust your plan when necessary. The key is to keep your long-term vision intact while making necessary 
short-term changes. 

7. Stay motivated and accountable

The reality is that motivation is fleeting. Remind yourself of why your goal matters to you, and visualize the benefits of achieving it. Don’t be shy to share your goals with a friend or family member to help hold you accountable. 

Ready to set your first financial goal?

First and foremost, congratulations on embarking on this exciting journey! Just as every twist and turn on a road trip holds a unique experience, each financial milestone brings you closer to turning your dreams into a reality. So buckle up, embrace this adventure, and relish the joy of celebrating every step of progress on your road to financial security.

Note: The information in this blog is for information purposes only and should not be used or construed as financial, investment, or tax advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade, Inc., its affiliates or any other person to its accuracy.

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