Lesson 2.4

7 steps to set a good financial goal that sticks

We’ve all set new year’s resolutions that didn’t quite stick. But learning to set and achieve money goals is an important skill to develop on your financial fitness journey.  

Financial goals are always best if they consider your personal circumstances and aspirations. According to the SMART methodology, they should also have the following five features: Specific, Measurable, Achievable, Relevant and Time-bound. 

Another way to think about a good money goal is that it should represent ‘a dream with a price tag and a deadline attached’. 

So, whether you want to pay off a high-interest debt, save $1,000 for an emergency fund or save up for a holiday or home deposit, these seven steps can help you make your financial dream a reality.

1. Identify your money dream

The first step to setting a money goal is to identify a ‘money dream’. Ultimately, we’re all just trying to secure enough money to buy the things we need and want over our lifetimes, including when we’re too old to work.

So, it’s really important to get a rough sense of what you want that lifetime to look like. Are you paying down your mortgage? Reading a book in a home that you own in retirement? Or sailing around the Bahamas? Envisioning your ideal future will help you to set meaningful money goals.

Grab some paper and set a timer for 10 minutes. Write down any words or pictures that represent your dream life and what your perfect day would look like, from dawn to dusk. See what comes up and use it as your North Star as you create the life you want. Revist lesson 2.1 for some more helpful prompts.

Of course, you can have multiple elements to your money dreams but start with a single financial goal and then repeat the following steps for each subsequent goal.

2. Attach a price tag   

Next, you need to put a price tag on your dream.

Do your research. What exact size of home deposit do you need to buy a home in the area you are looking in? How much, in exact dollar terms, are you looking to pay down in debt?

You need to have a price tag attached to your money goal so that you can know whether you’ve met it or not (specific and measurable).

3. Set a deadline

Next, set a deadline to really hone your attention. So, we’re not just paying off a debt ‘at some point’, we need to decide if we’re paying it off over 12 months, or over 24 months. Again, be realistic. 

Then, chunk it down. If your goal is to save up $2,000 in 12 months, you’ll need to save approximately $38.50 a week, or $167 a month. 

It can help to automate your savings, so you know you are on track to meet your deadline.

4. Monitor your progress

Once you’ve identified your money goal and given it a price tag and a deadline, it’s important to check in regularly with your goal and monitor your progress. This will help you to stay motivated.

It can help to write down your goal. If you’re a visual person, find a picture related to your goal. Save it as your screensaver or put it on your fridge to regularly remind you where you’re heading.

Most banks today have goal-based functions you can use. If you're a CommBank customer, the CommBank app has handy features to help you set and visualise your progress towards your savings goals.

5. Share your goal

Sharing your goal with a trusted friend or family member can also be helpful to keep you accountable to your goal. Only share your goal with people you trust to support and uplift you.

6. Don’t beat yourself up

If you can’t keep up with the pace that you initially set for your goal, don’t abandon it completely.

The important thing is that you’re moving in the direction of your money dream. If life happens and the timeline needs to change a bit, so be it.

Stay committed to your vision, to the dream you’ve identified for yourself and don’t be afraid to start over or modify the plan. Also, remember to regularly check in with your money dream to make sure it’s still relevant. Setting money goals is all about trying to create the life you want for yourself. There are no wrong answers and no limits to the number of times we get to attempt to create our dream lives.

7. Celebrate your wins

When you do achieve a goal, remember to take a moment to celebrate and acknowledge your success. If you want, you can treat yourself to something small.

Often, however, the satisfaction of achieving something that aligns with our life goals is rewarding enough. Be proud of yourself and how far you’ve come and use that sense of pride to motivate you towards achieving your next goal!