How to Reach Large Financial Goals
As with any big or longer-term goal, such as a fitness goal or educational goal, it can be difficult to look at the end goal and break it down into smaller pieces so that you can actually work on manageable steps to be able to accomplish it. And it can be difficult to stay motivated so that you actually accomplish our goals. But following the steps listed below will help you define and reach your large financial goals in a reasonable amount of time so that you can win with your money.
1. Make sure the financial goal is worth reaching.
Before you start working toward achieving a large financial goal, look deep into your heart and really examine your personal values to determine if the goal is really in line with those values and with what you want to accomplish overall in your life. For example, if you think you want to set a goal to buy a $30,000 sports car in five years but what really brings you the greatest joy is spending time with your grandkids and seeing them succeed in life, then that goal probably doesn’t really align with your values. Instead, setting up ESA or 529 college savings plans could be a better option.
When thinking about your financial goals, don’t be afraid to ask yourself some tough, soul-searching questions—and then be honest with yourself. Ask yourself if you’re really doing this for you, or if you’re doing it to impress your broke neighbors whom you don’t really even know and who really shouldn’t have any influence over your financial decisions.
As you sit down to make large financial goals, ask yourself questions like this: Is this something that will bring me lasting joy or long-term financial security? Is this a purchase or an investment or an experience that I will be glad I did and feel good about 1, 5, 10, or even 20 years from now? Will working toward this goal put other, more important financial goals at risk? Even good goals can cause problems if you’re not careful. For instance, putting away too much money for your kids’ college fund when you don’t have an adequately funded retirement account is not a good idea. Similarly, purchasing a brand-new car at the expense of fully funding your Roth IRA or being able to pay off your (nonmortgage) debt in a reasonable amount of time (generally, two years or [preferably] less) is also not a good idea.
2. Ensure that the goal is specific and measurable.
If you are familiar with the SMART model for goal setting, then you will recognize these two items in this section. In order for a goal to be effective, it has to be specific. So, instead of setting a goal of “I want to be financially secure,” which is neither specific nor measurable, a specific and also measurable goal would be “I want to have a net worth of $1.5 million dollars by the time I retire in 17 years.”
3. Make sure that the financial goal is realistic for your circumstances.
It is also necessary that the goal be something that you can actually realistically accomplish. If you have a goal of paying off your $120,000 of massive student loan debt in five years but you make $18,000 a year at a job that you love but where there is virtually no potential for increasing your income and you can’t do overtime and aren’t willing to get an extra job or do a side hustle, then the goal isn’t really realistic—at least not without some pretty drastic changes in your circumstances.
Now, if you instead set a goal to get a job making $75,000 a year using that great degree you earned while acquiring that $120,000 in debt and then also committed to live on $15,000 a year and wait tables five days a week to earn an extra $2,000 a month and then you set a goal to have your debt paid off in 2 years, then with those numbers and assuming nothing changed, that would be a realistic (and rocking awesome) goal.
4. Determine how soon you want to reach the financial goal.
When trying to figure out a timeframe to accomplish your financial goals, be realistic but aggressive. If you have $35,000 in credit card debt, don’t take 7 years to get it paid off! Instead, bust into that goal, turn your life around, and pay off that $35,000 in two years or less by getting an extra job or side hustle (or more than one), by cutting your lifestyle, by working hard and seeking a raise or promotion, by doing overtime if you can, and by finding a higher-paying job if needed. You can wander your way into debt, but as finance guru Dave Ramsey says, you can’t really wander your way out of debt. It takes dedication, determination, discipline, and drive.
5. Decide how much money you will need to save each month toward the financial goal.
Once you know your goal is realistic and once it’s specific and measurable and you know how soon you want to accomplish it, then you can figure out how much you need to put each month toward your goal. If your big financial goal you are saving toward is to save a 20 percent down payment for your first home, and you want to be able to buy a $150,000 home within five years, then you know that you need to save $6,000 a year, which is $500 a month. I know that $500 a month is a significant amount of money, but it’s also definitely doable if you have a decent-paying job and minimize your spending in others areas.
6. Open up a separate savings account to help you reach the large financial goal.
So that you don’t accidentally spend the money that you meant to allocate for you large financial goal, set up a separate savings accounts so that you can set up automatic transfers from your checking account to that new savings account. I love our online bank accounts with Capital One 360 because we have been able to set up several separate savings accounts for our various financial goals, such as fully funding a (six-month) emergency fund, purchasing another vehicle, saving for home maintenance and car maintenance, saving to replace furniture and appliances when needed, saving for vacations and gift giving, and more
7. Display a large visual reminder of your financial goal that you can update as you make progress.
A great way to help you get and stay motivated to reach your big financial goals is to track your progress. You could use construction paper loops that represent every $1,000 you pay off in debt, for example, or you could use a thermometer or similar visual representation that can show your progress toward reaching your goal. Put it where you will see it often (such as on the fridge door, bathroom mirror, or similarly frequently seen area), and make sure to update it frequently to show how you’re winning with your finances!
My favorite way to track or simply see at a glance our financial progress over the last few years is with an awesome free app called Personal Capital. With the app you can monitor your progress and see your investments grow over time (and also see your savings accounts and checking account balance grow as well). This personal finance app lets you see not only your balances in all of your various checking and savings accounts and for your credit cards and things like that, but it also links to your investment accounts, including your company 401(k) plans and Roth IRAs, so that you can see your complete financial picture and know your net worth at any time. It’s pretty awesome! You can sign up for a free account here!
8. Celebrate milestones along the way if you need extra encouragement to stay motivated.
In addition to having a visual indicator of your progress, you can also set up milestones along the way at specified intervals, and then do something fun to celebrate each one, such as going out for ice cream as a family, going to the movies, buying a new dress, or going out to lunch or dinner.
9. Periodically reevaluate your financial goals, and make adjustments if needed.
As you are working toward your financial goals, periodically reevaluate both the goals themselves and how you are doing making progress toward them. You may determine that you can do something now (if you are in a different situation than you were when you started the goal) to accelerate your progress. Maybe you can save or invest more money toward your financial goals (and maybe even accomplish them sooner) than you had originally planned. Or maybe the opposite will happen. Maybe you’ll discover that you actually need to save less than you are currently saving for a particular goal in order to save more for something else or pay off debt or have more money for other committed expenses (such as music lessons or soccer team for your kids). Or maybe you’ll discover that the financial goal you had before really isn’t as important as you thought, and you will save or invest your money toward something else that you feel has more long-term value.
In the same way you would work to reach any other type of goal, reaching your financial goals takes motivation and determination. When making your financial goals, to increase your likelihood of successfully reaching them, make sure that they are SMART goals, meaning that they are:
If appropriate, you could also share your financial goals with friend or family, and this might inspire you to be able to achieve your goals even faster than you had planned. And share them with us on the new, closed Families for Financial Freedom Facebook group. We would love to cheer you on!
Invitation to Share
Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!
Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.