Kim Borwick, Financial Editor for Annuity.org
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    Kim Borwick

    Kim Borwick

    Financial Editor

    Kim Borwick is a writer and editor who studies financial literacy and retirement annuities. She has extensive experience with editing educational content and financial topics for Annuity.org.

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    Emily Miller
    Emily Miller, Managing Editor for Annuity.org

    Emily Miller

    Managing Editor

    Managing editor Emily Miller is an award-winning journalist with more than 10 years of experience as a researcher, writer and editor. Throughout her professional career, Emily has covered education, government, health care, crime and breaking news for media organizations in Florida, Washington, D.C. and Texas. She joined the Annuity.org team in 2016.

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    Peggy James, CPA
    Peggy James CPA

    Peggy James, CPA

    Certified Public Accountant

    Peggy James is a certified public accountant with a Master of Accounting. She has spent the past several years of her career focused on working in higher education finance roles. Peggy also has accounting and finance experience working in the corporate and nonprofit sectors.

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  • Updated: September 20, 2022
  • This page features 10 Cited Research Articles
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How to Cite Annuity.org's Article

APA Borwick, K. (2022, September 20). Setting Financial Goals. Annuity.org. Retrieved October 3, 2022, from https://www.annuity.org/personal-finance/financial-wellness/financial-goals/

MLA Borwick, Kim. "Setting Financial Goals." Annuity.org, 20 Sep 2022, https://www.annuity.org/personal-finance/financial-wellness/financial-goals/.

Chicago Borwick, Kim. "Setting Financial Goals." Annuity.org. Last modified September 20, 2022. https://www.annuity.org/personal-finance/financial-wellness/financial-goals/.

Setting appropriate financial goals requires a relatively high level of financial literacy. It’s important to understand the basics of finance, including how to create a budget, the way taxes work, the difference between types of investments and various other personal finance topics that impact your personal finances.

If you feel ill-equipped to make financial decisions on your own and realize you need to improve your financial literacy, add this to your financial goals now because this is the foundation from which you will develop the goals that will underpin your entire financial future.

What Are Financial Goals?

Your financial goals are the specific monetary amounts you are committed to obtaining that will allow you to realize your vision for your life. As with any goal, financial goals should be aligned with your long-term plans, whether these plans include putting children through school, maintaining a particular retirement lifestyle or paying off and staying out of debt.

Good financial goals are detailed. Generic goals such as “raise my credit score” are unlikely to push you to achieve them for a number of reasons.

First, the goal is ambiguous. What is your current credit score? How high can you realistically expect to raise your score in a set time frame?

Even if you wrote down this goal and reviewed it every day, you would likely struggle to figure out where to start, and you wouldn’t know when you’d achieved it.

Second, unless you know why you want to raise your credit score — that is, the outcome you’re hoping for by raising your score — you won’t feel a sense of urgency to achieve it. Maybe you heard somewhere that you should have a credit score of 750, but you don’t know why it matters. What’s the benefit to you?

While improving your credit score is a worthy goal for people with scores that fall in the 680 range, experts claim that there is a point of diminishing returns once you reach a credit score of 760. The question then becomes whether this goal is relevant to your current financial plan and status.

This is why you need SMART financial goals.

SMART goals are defined by the following characteristics:
  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time-bound

If you amended the goal of “raising your credit score” to “improve my 680 credit score by 25 points over the next 12 months,” you would have a SMART goal that could be tracked and measured. The ability to monitor this goal significantly increases your chances of meeting it.

Your Financial Goals and Your Budget Go Hand-in-Hand

Creating a realistic budget and sticking to it is a worthy financial goal in itself. Without a budget, you will flounder in your efforts to meet your goals.

Money management and financial planning rely on solid budgeting skills. Your financial goals are a component of your overall financial plan, and your budget allows you to review your plan and adjust as needed to reach your goals.

Just like professional athletes keep detailed records of their workouts and successes to gain perspective and track their progress, you can use your budget to review your financial achievements and setbacks and identify any areas of your plan that may need to be adjusted.

Your budget will also give you a feeling of control over your financial situation and the confidence to persevere in the face of financial adversity.

Another often overlooked benefit of a budget is its usefulness as a communication tool. Perhaps you and your spouse are not seeing eye-to-eye on spending habits. Or maybe your kids think money grows on trees, as the proverb goes.

The ability to present quantifiable proof of the family’s spending habits and how they are undermining everyone’s goals can support your argument for needing to cut back on take-out or putting a certain amount of money in the college fund every month.

View our glossary of key financial terms

Three Types of Financial Goals

In the context of investment strategy, the Financial Industry Regulatory Authority (FINRA) defines the three types of financial goals as long-term (more than 10 years), mid-term (three to 10 years) and short-term (less than three years).

It’s useful to look at your financial goals — not just your investments — as either long-term, mid-term (or intermediate) and short-term.

Just as setting time frames for your investments will allow you to strategize more effectively, having clear, realistic time frames for the rest of your financial goals will better equip you to plan the steps you need to take to move closer to each one.

Long-Term Goals

Long-term goals, such as ensuring financial security in retirement or paying off your mortgage, are further out on the horizon. Your long-term financial goals often include several short-term or mid-term goals. It’s always a good idea to break down large goals into smaller, more immediate goals.

Short-Term Goals

In addition to smaller, more narrowly focused goals that contribute to your long-term goals, you may also want to set short-term goals for things you’d like to afford in the near future, such as a bathroom renovation or a trip to France. Notice that our example here is specific. There’s a reason for this.

According to financial psychologist Dr. Brad Klontz, “we need to give our financial goals specific, exciting names that conjure up images and feelings that thrill us.”

The power of financial psychology to help you achieve your goals is partially in the way it encourages you to visualize the future and what success will look like. This applies to all of your financial goals, not just your short-term goals.

Mid-term Goals

Mid-term, or intermediate, goals may include endeavors such as saving the premium payment for an annuity that will provide you with lifetime income, improving your credit score or obtaining the capital to start your own business.

You may want to explore ways to generate passive income or hire a financial advisor to help you plan your retirement. Each of these examples of mid-term financial goals has a time frame of three to ten years and is ultimately a stepping stone to a larger goal.

Examples of different types of financial goals include:
  • Improve your financial literacy
  • Create a budget
  • Save for retirement and other long-term plans
  • Save for short-term and mid-term plans
  • Pay off debt
  • Build good credit
  • Make more money
  • Create an estate plan
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What Are the Benefits of Setting Financial Goals?

Writing down clear, realistic financial goals will help you achieve them. Research shows that people who put their goals in writing and revisit them regularly have a better chance of achieving them. This system works as effectively for CEOs as it does for Olympic athletes, and it can work for you, no matter what type of financial goals you set.

The tangible nature of specific, written financial goals makes them easier to track, and the progress you make toward your short-term goals will keep you motivated to reach your intermediate and long-term goals, too.

The simple act of reviewing your financial goals and weighing your decisions against your budget and priorities will increase the likelihood that you will stay on track, occasionally sacrificing a night out or the next generation of that tech gadget everyone else is charging to their credit cards.

Another — often underrated — benefit of setting financial goals is the decrease in stress and anxiety you’ll experience when you face your financial reality head-on.

A survey from February 2022 conducted by the American Psychological Association revealed that finances were at the top of the list of stressors for Americans.

Regarding personal stressors, the report stated that “the proportion of adults who noted money as a source of stress (65%) was up significantly from the Stress in America surveys in June (61%) and February (57%) 2021.”

And in August 2022, Experian reported that Americans averaged $5,589 in credit card debt in 2022.

Imagine the feeling of freedom in knowing that you’re not among the 64 million debt-laden Americans, and let that drive you toward your goals.

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Tips for Setting Achievable Financial Goals

Your financial goals are unique to you. They are an extension of your values, of what’s truly most important to you. You may find that some goals are easier to achieve than others.

Maybe you’re more motivated to save money for traveling than for furnishing your home. Your vision for your future should guide you as you set your financial goals.

As Dr. Klontz suggested in his article for CNBC’s “Invest in You: Ready. Set. Grow.” column, it’s hard to get motivated toward your financial goals if you don’t link your goal to the things you’re most passionate about.

Dr. Klontz’s tips for using financial psychology to achieve your goals include:
  • Visualize your ideal life and identify financial goals that align with this picture.
  • Give your goals names that conjure excitement and motivation.
  • Time-stamp your goals (a tenet of SMART goals).
  • Create visual representations to help you picture your goals.
  • Automate your success.

This last tip can have a huge impact on your success. Automating as much of the actions involved in progressing toward your financial goals can mitigate the perception that you’re doing without — or doing with less.

And fortunately, there are a plethora of resources available to automate and track your financial goals.

Resources for Setting and Reaching Financial Goals

From direct deposits to savings accounts and autopay options for credit cards to budgeting platforms that link to your accounts and update in real time, you have resources for nearly every type of financial goal at your fingertips.

Some are free, others are subscription-based, and the benefits and features vary. You’ll have to evaluate these resources based on your objectives to decide if the benefit is worth the cost or, just as importantly, the time you’ll have to invest to set them up and learn how to use them.

As with any tool, these software applications can’t do everything for you. You’ll need to regularly monitor your transactions and accounts and be aware of app settings and notifications to ensure everything is working the way you expect it to.

Budgeting
  • You Need A Budget (YNAB)
  • Mint
  • Quicken
Automated saving
  • Acorns
  • Chime
  • Digit

Keep in mind that any form of automation can throw off your budget if you don’t track all transactions carefully.

In addition to online banking and automatic bill pay, your bank may generate free spending reports, charts and other visual data on its website that you can export to a spreadsheet or budgeting worksheet.

You can also find free financial calculators and credit counseling services from nonprofits, such as the National Foundation for Credit Counseling, and financial literacy education and guidance on creating financial goals from government websites such as MyMoney.gov.

Finally, consider the words of George Herbert:

“Do not wait: the time will never be ‘just right.’ Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.”

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Last Modified: September 20, 2022
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10 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. American Psychological Association. (2022, March 11). Stress in America Stress. Retrieved from https://www.apa.org/news/press/releases/stress/2022/march-2022-survival-mode
  2. Blumberg, Y. (2018, October 9). Once you hit this credit score, going higher is a ‘waste of time,’ expert says. Retrieved from https://www.cnbc.com/2018/10/09/going-higher-than-this-credit-score-is-a-waste-of-time-expert-says.html
  3. Carter, A., Quakenbush, C. & McKernan, S.M. (2022, March 21). The Number of Americans With Debt in Collections Fell During the Pandemic to 64 Million. Retrieved from https://www.urban.org/urban-wire/number-americans-debt-collections-fell-during-pandemic-64-million
  4. DiFurio, D. (2022, August 9). Here’s How Credit Card Debt Varies by State. Retrieved from https://www.experian.com/blogs/ask-experian/how-credit-card-debt-varies-by-state/
  5. FINRA. (n.d.). Set a Time Frame for Your Financial Goals. Retrieved from https://www.finra.org/investors/insights/set-time-frame-your-financial-goals
  6. Klontz, B. (2019, November 19). Use financial psychology to crush those saving goals. Retrieved from https://www.cnbc.com/2019/11/29/use-financial-psychology-to-crush-those-saving-goals.html
  7. MyMoney.gov. (n.d.). About MyMoney.gov. Retrieved from https://www.mymoney.gov/Pages/About-Us.aspx
  8. National Foundation for Credit Consulting. (n.d.). About Us | NFCC. Retrieved from https://www.nfcc.org/about-us/
  9. Tatham, M. (2020, January 13). 2019 Consumer Credit Review. Retrieved from https://www.experian.com/blogs/ask-experian/consumer-credit-review/
  10. Wolfe, A & Lastoe, S. (n.d.). 10 Olympic Athletes' Daily Habits You Should Steal (That Don't Involve the Gym). Retrieved from https://www.themuse.com/advice/10-olympic-athletes-daily-habits-you-should-steal-that-dont-involve-the-gym