Financial goals are basically plans you set to manage your money. You can have short-term goals such as saving $1,000 for new tires, or long-term goals such as setting yourself up for retirement.

The reason goals are so important is that you commit to them, instead of just hoping that you’ll somehow sort out your finances. As you probably already know, there’s no finance fairy godmother or money gremlin that is going to magically pull money out of thin air to give it to you. It’s up to you to manage your money well.

Luckily, it is not that difficult to set good financial goals. It’s all about your priorities and the right mindset. Tackling them in a positive, realistic way can lead to lifelong success. Let’s take a look at 9 steps that create best practices for good financial goals.

Step 1 – Brainstorm

You undoubtedly have many financial goals you would like to achieve. However, not all are possible and in some cases they may not be worth your attention. Still, you need to start somewhere.

Jot down any financial goals that spring to mind. Don’t limit yourself – just let the ideas pour out. Put them in a document or write them on a piece of paper. The act of writing them out can help clarify them.

Now consider the motivations behind each of these financial goals. Are you considering a personal financial goal, because it is what your parents always did and you think you should too? Or do you have a strong reason that is your own that will motivate you even when money’s tight?

Also think about whether your financial goals align with your values. There’s no point in setting financial goals that don’t align with your spending and savings habit. You won’t achieve them.

Of course, your goals are all about your future too. Do you want to be sitting on a beach when you’re 50 or working until you’re 75 because you love your job? There’s no wrong answer. Consider long-term goals as well as what you would like to see happen soon.

Step 2 – Look At Your Income

Goals are all well and good, but they must align with what you earn. Sit down with a pen and paper or a good budgeting app and crunch the numbers.

Input how much you earn from all sources. Then list your recurring expenses such as debt payments, as well as occasional ones such as an annual subscription or insurance policy (divide the amount by 12 for a monthly amount). Don’t forget to include your discretionary (non-essential) expenses for things such as dining out, travelling, luxury items, gadgets, and vehicles.

Take a look at your end result. Do you have excess money you can put towards your financial goals? Or are you in the red at the moment? If so, it’s time for a reality check and something needs to change.

Step 3 – Change How You Spend

If you are in the red at the moment, you need to move into the black. You can do this by spending less.

Cut out how much you spend on discretionary items. This doesn’t mean you need to become a monk, but you should think about how you’re spending your money. That money could go towards a retirement fund, paying off credit card debt, or even putting your kids through college.

If you’re reading this and rolling your eyes because you think you can’t do it, start small. Set a budget for discretionary spending that is just $20 less than what you spend now. Now you need to know how you can direct that money to a particular goal.

Step 4 – Set Realistic Goals

Clearly, setting financial goals is all about you. Yet, some of the goals on the list you created may not be realistic. How do you know whether a goal is realistic? Make it specific and see if it pans out. Here’s an example.

Let’s say that you want to save more money. That’s a pretty vague statement. How much money do you want to save? How long do you want to take to save it?

In this case we’ll say you want to save $10,000 in one year. Is that realistic? That works out to be $833.33 per month. Unless you have a lot of extra money after you pay your expenses, that goal probably isn’t going to happen.

So, what can you do? Lower the amount, take longer to save, or earn more. Using our example, you may be able to save $10,000 over three years instead. That’s $277.77 per month, which is far more doable.

Pare down your list to a few short and long-term financial goals that you think that you can achieve. It’s quite alright if they feel a little tough, but keep them real. The idea is that every financial goal gets you one step closer to where you want to be. You don’t want to create goals that lead to constant failure.

Step 5 – Create Short & Long-Term Goals

So, what are short and long-term goals? Still following the same example where you want to save $10,000 over three years, you can break this down into even smaller chunks (short-term goals). In this case it would be to $277.75 per month. Your long-term goals would be to save $3,333 each year for a total of $10,000.

A general guideline for short-term goals are those that take weeks or months to achieve. Long-term goals take years or decades. Smart financial goals often involve both. It’s up to you which ones you prioritize.

Step 6 – Monitor Your Progress

Put the dates on your calendar and check your progress for each goal. For instance, you can check your bank account each month for a great dopamine boost.

Celebrate your achievements, but don’t go on a spending spree. Instead, tap into the momentum and do even more positive things with your money.

By the way, this manner of financial goal setting is also an excellent way to tackle your debt. Focus on your smallest debt or the one with the highest interest rate. Set a deadline to pay one off and once you have, put the extra money to put towards another goal.

Step 7 – Learn From Failures

It would be absolutely fantastic if you achieve every goal you set. However, the truth is not everyone reaches every goal. If this happens to you, look at the reasons why.

If the reason was out of your control, just regroup. Set a new financial goal and start again. If the reason was within your control, take a deep dive into what happened. Were you unwilling to commit to your budget? Do you have spending issues that you can’t curb? Do you set unrealistic goals, because you have unrealistic expectations?

Whatever the case, failures are learning tools. Own up to the root issue of the problem and create new financial goals that you are more likely to achieve. Understanding the true driving force behind your goals is vital when setting financial goals.

Step 8 – Use Smart Methods to Achieve Smart Financial Goals

Whether you have long-term financial goals such as setting yourself up for retirement, or short-term financial goals such as eliminating small debts, you need to commit. It’s far too easy to put things off unless you make your goals time and money sensitive.

Almost all financial institutions allow you to automate payments for bill payments, savings, and investments. When you commit to an automatic payment you’re putting your money where your mouth is, instead of hoping you’ll get to it later. The money comes out of your account automatically so you can’t spend it.

You may want to earmark money from your paycheck for high-interest savings account for an emergency fund or a 401(k) or IRA for your retirement. You may also want to consolidate multiple small debts into a single personal installment loan through online loan lenders. If your loan interest rates are lower than what you’re paying now, you’ll save money and make your life simpler.

Don’t forget to consistently use your chosen money management tool to monitor your budget. This definitely helps you achieve your financial goals.

Step 9 – Revisit Your Financial Plan

Your financial plan and your financial goals can change. In fact, you should revisit both whenever you have a major change in your life or your finances.

Review your plan periodically to ensure it reflects your current priorities, life needs, and finances. If it doesn’t tweak it to ensure your constantly making the most of your money.

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