How to Set Financial Goals: 5 Simple Steps


Most people have some kind of financial plan that they use to get through life. However, those plans are usually short-term, long enough to cover the next month or so of income and expenses.

At some point in your life, though, this micro-goal setting won’t be enough. You’ll want to plan for the future and set financial goals that will make you stable and ready for retirement.

If that sounds closer to where you are at this stage, you’re ready to take responsibility and start setting some long-term goals. It can seem overwhelming at first, but it doesn’t have to be!

These five simple steps will take you from micro-planning to retirement without any major life upheavals. In no time at all, you’ll be building that nest egg and enjoying the fruits of your labor.

1. Start With a Short-Term Budget

You’ve already been working in the “short-term” sector of your finances. Now it’s time to really look at them and see what’s going on.

If you haven’t recently evaluated your financial situation, you might be surprised at where you’re at. Make a list of your expenses, including any interest rates and payoffs on loans or credit cards.

Don’t forget to list all those monthly subscriptions that are easy to forget about. Review your bank statement for the past two months. Are there any automatic withdrawals you need to write down? Can you cancel any of them that aren’t being used?

2. Set Action Plans

How drastic your action plan to pay those loans off will depend on three things: The total debt you have, how much you want to save, and how far away you are from retirement.

If you have a lot of debt and only a few years to save, you’re going to have to cut some major corners. But if your debt is reasonable and retirement is a long way away, a simple strategy will work.

What’s your action plan for how you intend to pay those loans off within the time you have? Is it feasible with your current income?

3. Knock Out Your Debt

The fact is that those bills have to go in order for your finances to be stable. It could take some sacrificing of your spending habits to get rid of them, or you’ll need to find something somehow to make a little more money.

Check the job sites to see if your current pay rate is competitive. You might be able to make more by driving a few extra miles each way or asking for a raise. This article, for instance, gives compensation reports for doctors. It clarifies what a physician should be earning by region and specialty.

In addition to earning more, you need to get strategic about where your money is going. For instance, you can use a financial strategy like Dave Ramsey’s Snowball Method to start knocking out your debt. The trick is to pay off your smallest bill, then put that monthly amount toward the next lowest debt.

As your expenses become more manageable, you can start setting long-term goals and building a financial portfolio.

4. Set Long-Term Goals

Looking at the big picture comes next. You know when your debt will be paid off as long as you follow your action plan. What’s next?

Planning for major life events, like sending your kids to college, buying a house, or retiring, is part of long-term goal setting. Maybe you want to go back to school yourself.

Whatever your future holds, how are you going to handle paying for it? This should be part of your regular long-term planning.

Opening a separate savings account for each major event is one way to get started. Then, come up with a budget of how much money you need to allocate toward that expense and a plan to get there.

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5. Make Solid Investments

It’s never the best idea to put all your nest egg savings into one basket. Financial experts suggest having a diverse portfolio before you head into retirement.

Diversifying how you invest limits the risk of loss in one area. You can always do this on your own, but it’s a smart idea to hire a financial adviser if you’re not comfortable with your level of risk yet.

A diversified portfolio includes a mix of investments such as stocks and bonds, mutual funds, and cash. A financial adviser can help you reduce your portfolio risk and increase returns by spreading out your assets.


One of the most common reasons for individuals to end up financially unstable is because they didn’t plan for life. Of course, we can’t predict everything that will be thrown at us, but we can plan for what is expected.

When you set your financial goals, you’re minimizing the chance that you’ll end up in debt when major events pop up. The sooner you get started, the easier you’ll find managing your finances to be. But it’s never too late to get a handle on your money by setting and conquering goals!

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