How to set financial goals

Setting a goal is an important prerequisite for accomplishing almost anything. And without setting clear financial goals, some people are likely to spend their lives aimlessly earning and spending, rather than building wealth and achieving a more financially secure life.

Rather than cycling through your earnings with no clear direction, it’s important to take time to set financial goals. Working with a qualified financial professional can help you think through your financial situation and focus your ambitions. Most financial professionals recommend setting goals for different time frames, including short-term, medium-term and long-term, and revisiting those goals at least once per year to make sure you’re still on track.

Set short-term goals

You can’t fund your retirement account in six months or a year, but you can accomplish smaller, shorter-term goals. These are goals that can be accomplished in one month to one year.

Setting short-term goals helps you build confidence by achieving quick wins. In addition, accomplishing short-term goals can help free up funds to invest toward long-term dreams.

Establishing or tweaking your budget is an important short-term goal. It could be difficult to meet any financial benchmarks unless you know where all your money is going. Once you’ve developed a budget that reflects all your monthly spending, it’s easier to see which areas you can cut. If you already have a budget, you may want to reassess it regularly. Online budgeting apps make it easy to keep track of your spending.

Other powerful short-term financial goals include building an emergency fund and paying off credit card debt or other high-interest consumer debt. For instance, if you have no emergency fund, you can aim to save at least $500 or $1,000 and set it aside for unexpected expenses. Reaching goals like these won’t happen overnight, but you can make progress in a year.

Set medium-term goals

When you’ve created a budget and made headway toward building an emergency fund and paying off credit card debt, you might want to start tackling goals that will take a little longer to accomplish. Typically, medium-term goals take about five years to accomplish, so they take persistence, but not as much as funding your retirement.

These goals can help pave the way for meeting long-term goals. For example, purchasing appropriate life insurance and disability insurance might be an important medium-term goal. Having the right insurance policies in place will protect your family and your income and ensure that your financial responsibilities will be met even if you are personally unable to fulfill them. 

Paying off student loans is another important medium-term goal. When you’re able to lower or eliminate student loan payments, you can free up more money to save for retirement or meet other financial milestones.

For many people, purchasing a home or second home, or funding children’s education, are important medium-term goals. Figure out what your dreams are and develop a plan for reaching them, such as saving for a down payment on a home or contributing to a tax-advantaged college savings account.

Set long-term goals

Long-term financial goals are those that take more than five years to accomplish, such as paying off a mortgage. For most people, the ultimate long-term goal is funding retirement.

Many financial professionals recommend saving at least 10 percent to 15 percent of your income in tax-advantaged retirement accounts such as 401(k) plans, 403(b) plans, IRAs or Roth IRAs. However, you may be more successful at creating a financially secure retirement if you have a specific goal for the amount you want to save.

You can develop a retirement savings goal by first estimating how much money you’ll need on a monthly basis during retirement. Use your current budget to help you come up with this figure. Multiply this monthly figure by the number of years you expect to be retired.

When you’ve multiplied the amount of money you may need each month by the number of years you plan to be retired, the result is the total amount of money you may need in retirement. Next, subtract any income you will receive in retirement, including Social Security, retirement plans such as 401(k) and 403(b) accounts and pension payments. The difference is the amount that will need to be funded by your investment portfolio.

An online retirement calculator can help determine the value you may need to amass in your investment portfolio in order to fund your retirement.

Revisit your goals regularly

To meet the financial goals you have set, it’s important to revisit them regularly, track your progress and adjust if necessary. If you choose to work with a financial professional, he or she will likely schedule meetings with you on at least an annual basis to check on your progress and discuss whether your financial aspirations have changed. When your hopes and dreams change, your financial goals may change too—so don’t be afraid to adjust them along the way.

As the market experiences ups and downs, it may be necessary to adjust some of your holdings to make sure your portfolio is properly diversified and tracking for growth. As you grow closer to retirement age, the industry suggests that one should also adjust his/her portfolio from an aggressive approach to risk to a more moderate approach, and eventually, a more conservative approach.

Make plans for your money by setting goals and working systematically to achieve them.

Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit or protect against market loss. 

To get started creating a personalized financial plan, contact your Corebridge financial professional to schedule a virtual meeting.



This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice, consult the appropriate professional.