I think we’re all pretty aware that it’s important to set goals and then have a plan to achieve them, otherwise we’ll probably give up on them pretty quickly. It’s the reason that I dread going to my gym in January because it’s always super crowded but know that come mid-February it’ll be back to normal. Just as it’s important in life, it’s also important to set financial goals for yourself. If you don’t have a destination in mind and if you don’t have a plan to get to that destination; you’ll end up meandering all over the place! Today I’m going to attempt to tell you why it’s so important and hopefully set a few goals with you. 

SMART Goals

Earlier this year I did a leadership training at my company and one of the things they talked about was working with your direct reports on setting goals. Two things stuck out at me – that everyone’s goals and goal setting process might look different, and then how for a goal to have the best chance of being put into action it needs to be “SMART” – Specific, Measurable, Attainable, Relevant, Time-Based. As much as I used to roll my eyes at doing all that for goals, I’ve failed plenty of times to know that there’s definitely some truth to it. 

Well that’s all nice and pie in the sky type information but how do I personally set and track financial goals for myself? 

What I value and what I work towards

Before setting goals for yourself, I think it’s important to reflect on what’s important to you. Take stock of your current financial situation, and figure out what types of goals you should be having. Don’t have an emergency fund? Probably a good goal to set. In more debt than you’d like to be? Probably wise to set a goal of getting aggressive in paying it down. 

For me, we’re at a spot where the only debt we have right now is our house, after having got aggressive early on with student loans. So for us, what I value right now is of course having a good safety net (emergency fund and insurance) and building a strong foundation. At this stage of my life, Mrs. Money and I are focused on growing our investments as we hope to be able to one day retire off of them. I also value travel, even though we’re not able to do as much of that right now. So, I set my financial goals aimed at those types of things.

Without financial goals, I’m not sure how well we’d save and invest. I find that having a goal, whether firmly or loosely defined really helps out in keeping me focused on achieving them. Each month in our budget, we have a category for saving and investing and although more often than not we don’t meet 100% of that goal (I set it pretty high), we do meet at least 50% if not more of it. Having goals helps keep you focused!

Examples of past goals

When I started my first real job out of college (I consider my stint at the Army Navy Surplus store more of a side gig), I certainly didn’t have much but was super thankful to have gotten a decent paying job in healthcare consulting. Right out of the gate, getting an emergency fund was near the top of my list. So, each month I started putting away $250-$500, or as much as I could afford until reaching a few thousand dollars. Once I got married, Mrs. Money and I kept growing that emergency fund and we continued putting a few hundred aside each month until we’d reached our goal of about 6 months of expenses. After that we then turned our focus and energy to student loans, and super aggressively paid an extra $1,000 per month until we were done. Such a good feeling achieving that goal! We kept that momentum going and then turned towards saving for a house down payment which we finally achieved our dream in May of 2014! 

After getting our first house, I will say that our focus towards financial goals slowed down a bit. We had made great progress and were very proud of our accomplishments. Looking at our present day, we’re focused on saving for retirement and slowly growing our other investments. One tangible goal we do have right now is saving $4,000 each year for BabyMoneyFinance’s college fund. I don’t know how much college will cost when the time comes but I figure being as prepared as we can afford will pay off! 

2021 goals

Looking at the present day, I’ve been finding it more difficult to set more tangible goals for myself and have tried to get more creative. A couple of goals we’ve set for ourselves in 2021:

• Save 15% for retirement. This is a goal we’ve had for a while now and have met it with mixed success. My company gives us a 6% match up to a dollar amount so I normally do 9% with that 6% match, then increase once that match is over. Mrs. Money is pretty close to 15% 
• Save 15% for ESPP. My Employee Stock Purchase Program has been a great financial benefit offered by my current company and my last one. We get a 15% discount on top of the lower price of the start vs. the end price during the offering period (6 month increments) It’s been an incredible financial gain and a great way for me to grow my money. 15% is the max you can do and I did 10% the first year on the job, 12% the second year and now I’m finally doing 15%!
• Save $4,000 for BabyMoneyFinance’s college fund. $4K used to be the max you could do for a tax write-up here in my state, so it just felt like a good number for me to work towards. It’s quite a lofty goal but one that I would love to achieve! 
• Buy a share of an index fund each month. I’ve got money going into retirement and ESPP and savings, but I’ve been trying to be more focused on making my money work as hard as a it can. Most years, keeping my money in the stock market will yield more than my High Yield Savings Account and so I’ve been trying to be more diligent about putting money into my brokerage account – even if it’s 1 share at a time!
• Pay a little more towards the house each month. The interest rate is pretty low on my house right now so I’m not trying to take money away from higher paying index funds but still am cognizant that our house is a large debt for us. Each month we try to pay a little more towards the mortgage; whether it’s $25, $50 or even $100; I still get a big sense of accomplishment paying a little more. 
• Take a family vacation (or two) each year. Even with COVID, we still value and enjoy vacations. I’ve learned although we’re not able to take big international or domestic trips, we can still take little trips here and there! This year we were able to do 2 beach short beach trips and did so safely! 

Summary

Setting goals is so important in life, and the same holds true with your personal finances! Figure out what type of a goal you should be setting for yourself, set SMART goals, work towards them, and celebrate both your progress and your achievements!