Posted on Tuesday November 05, 2024

How to set a financial goal and reach it in 4 simple steps

Money is not an end in itself. It is a useful tool for making your dreams come true and enjoying life on your own terms. How can you avoid falling into the trap of routine, unpaid bills and unnecessary expenses that accumulate and prevent you from living life to the fullest? With well-established financial goals in line with your priorities.

Follow the guide to find out how to set and achieve your financial goals.

What is a financial goal?

A financial goal is an intention related to your life goals and personal aspirations which requires money to achieve.

To live debt-free, buy a car or a house, afford your ideal wedding, take a one-year sabbatical, travel or retire, you need a certain amount of money. Knowing why you are saving is motivating!  

Financial goals help you prepare for the future and provide a cushion in case of emergency. As your situation is likely to change over the next few years, your goals will evolve along the way as you progress.

Financial goals are usually categorized in terms of time, i.e. short-, medium- or long-term.

1.     Short-term goal

Do you have an achievable goal in the next one to three years? It is a short-term goal! For example, building an emergency fund for unexpected expenses, paying off debt and travel are all short-term goals. These goals are often easier to achieve because the amount of money required to do so is less. If this is not the case, it may be a medium- or long-term goal.

2.    Medium-term goal

A medium-term goal is one that should be achievable within three to five years. A few examples? Buying a car or a house (depending on your means), saving for your wedding or undertaking some renovations.

Your medium-term goals can also help you achieve your long-term ones. For example, if you have a student loan, paying it off can help you save more for retirement. Paying off your mortgage on your principal residence could give you the means to renovate your kitchen or even buy a cottage!

3.    Long-term goal

Where will you be in five, 10, 15 years? What would you like to achieve? Long-term goals propel you into the future and usually take five years or more to achieve. These are the goals that guide most of your decisions. Paying off your mortgage, paying for your children's education, living debt-free, starting a business and retiring are examples of this type of goal.

Why is having a financial goal important?

Setting financial goals means taking control of your life. Instead of being subjected to unforeseen events and expenses, you decide which direction to take based on your values and priorities. You become more far-sighted because you make financial choices motivated by what really matters. You are building the future for yourself and your loved ones.

Having specific goals is energizing. You know why you are working so hard and what the reward will be! Financial goals also allow you to:

• Define your priorities;
• Set a realistic target to save the right amount;
• Choose a strategy and a game plan to achieve them, making choices such as cutting expenses or finding other sources of income;
• Use the right savings products, such as a TFSA, FHSA, RRSP or RESP;
• Be more aware of and responsible for your spending;
• Track your progress;
• Make career decisions, such as trying to get a promotion or pay raise, or finding a second job if you have very ambitious goals;
• Reduce stress and anxiety. With the right plan, you can achieve your goals!

How to set a financial goal in 4 easy steps

Where to start? Here are the steps you need to take to set your financial goals. Get started now!

1.     Identify goas

Get out your paper and pencils! Dream a little! By yourself or with a partner, develop a list of the goals that are most important to you. Write down all your ideas, then classify your goals according to the time frame in which you want to achieve them (short, medium or long term). 

2.    Organize goals by priority

What's most important to you? What goals motivate you? What is your medium- and long-term vision for your future?

Based on your values and priorities, draw up a list of priority goals. Choose a top 3. It will be easier to focus and save for these goals rather than trying to achieve them all simultaneously.

Do not neglect the goals that bring you happiness. You have every right to want to enjoy life to its maximum! If travel motivates you, it can be one of your top priorities.

In any case, setting up an emergency fund if you do not already have one should be on the list. To establish the amount of your emergency fund, calculate an amount sufficient to cover your current expenses for a period of nine months. This fund will come in handy in the event of job loss or unexpected major repairs to your car or home.

3.   Define goals in SMART format

The more specific your goal, the more likely you are to achieve it. For example, "take a trip to Europe" is a rather vague goal, and difficult to measure. What kind of trip? When? For how long? With whom?

"Save $500 per month to take a trip to Italy for two weeks with my partner and two children in a rented house for a total cost of $10,000."

At this stage, you want to define your three main goals in SMART format:

4.   Taking stock and making adjustments along the way

At least once per year, take a look at your progress. Where are you in achieving your goals? Do you need to readjust your target? If your income has increased, perhaps you can save more quickly to reach your goals. On the other hand, if your income has dropped or your expenses are higher, adjust your goals accordingly.

How to reach a financial goal

Saving is the key to achieving your financial goals! To save the money you need to reach your goals, you can:

• Choose a fixed weekly or monthly amount that will be automatically transferred to your savings account;
• Determine a percentage of your net salary to be set aside each month, e.g. 5%.
• Save a certain amount each month depending on when you want to reach your goal. In the case of our trip to Italy, if you want to leave during the children's summer break, you can decide to save more each month to make the trip earlier, or a little less to make it later.

A pro tip: Opt for automation! Once you have decided on the amount to transfer to your savings account, set up an automatic transfer the day after you receive your paycheque. You will not have to think about it, and you will be well on your way to achieving your goal.

Is your financial goal a little more complex, like paying down debt? Develop a strategy to achieve it, such as paying off debts with a higher interest rate first. Do not hesitate to call on a UNI advisor who can help you at this stage by guiding you toward the products or services that best meet your goals.

However you choose to save, start now! Choose a small, easy-to-implement savings habit, like making yourself a lunch instead of buying a meal on the run every day. It is not the amount that is important, it is the action that counts.

Set financial goals for fun and for life!

Taking the time to think about your financial goals and discussing them with your partner is an investment, but it pays off! By doing so, you take control of your finances to achieve what matters most to you and your family. Your goals are unique and will evolve over time. Identifying them correctly will help you live a full and rewarding life.