Financial Goal Setting

Financial goal setting is a bit different than setting other goals. Since money and numbers are involved, a more quantitative approach is necessary. That means breaking out those mad math skills.

If you’re not great at math, luckily there are lots of Internet resources to rely on that will do the heavy lifting for you. I’ll supply you with the links you’ll need, so there’s no excuse for not getting started right away.

Show me the money

Financial goal setting works great when it comes to attaining goals associated with money, but you’ve got to follow your goal setting strategies to make it happen. Most importantly, you must believe it's going to happen.

Your thoughts determine your reality. If your thoughts are negative and not conducive to producing money and following your investment plan, you may never get there. Living consciously not only enables you to be happier, but richer too. It's a win-win.

Check out my own watershed moment that helped me along.

Set up a financial goal setting meeting (with yourself)

Don’t skip the most important part of the financial goal setting process. Set aside at least an hour for your meeting right now. It’s too important to put off any longer. Make it for a time when you will be at your best.

If you have a significant other, invite him/her to the meeting. Often opposites attract. If your lover is the “spender” and you're the more fiscally responsible of the two, all the more reason to include them. Financial goal setting will help get that spender under control.

You've got to "write it down"

Write down all of your financial goals. Try and stick with more altruistic ones that will add to your money-making ability or increase net worth, but include those less-than-altruistic financial goals as well.

Examples of altruistic financial goals:

  • Retiring comfortably
  • Buying a house
  • Continuing education (for you, your spouse, kids, or grandkids)
  • Getting out of debt

Examples of less-than-altruistic financial goals:

  • New car or truck
  • Bass fishing boat
  • Lavish vacation
  • ???

Write a small paragraph for each goal. Describe it using first person language, and try and act like you’ve already achieved it. This will help later if the going gets tough.

Make sure these literary masterpieces are readily assessable. You'll need to pull them out from time to time to remember why you are being more thrifty and frugal in those more discretionary expense categories (the money has to come from somewhere).

Since I have a history with Day-Timers®, I still use a diary and pencil to record my goals. A notebook or a whiteboard works fine too. As this Dominican University study shows, there is a lot more to writing down your goals than pure urban myth, so make sure you take the time to do it.  

Each of your financial goal setting paragraphs need to include the following:

  • completion date
  • amount needed to be saved
  • expected rate of return
  • first person language and visualization

Doing the math

Each goal has a completion date because you’re going to calculate how much you need to save each month to attain your goal in the allotted time period. Choose a rate of return for your savings time period and consider any money already saved. For longer term goals, an inflation factor needs to be added.

If that sounds complicated, it kinda is, which is why we’ll use online resources to do the heavy lifting. If you’re more hands on, a spreadsheet or financial calculator works just as well.

The farther into the future the completion date of your goal, the harder the quantification process. Monthly savings for the down payment on a home in 3 years is a lot easier to figure out than how much to save each month for retirement in 20.

I’ll show you how to do both.

Short term goal example

Let’s expound on the prior “saving for a down payment on a house” example. Let’s assume $30,000 has already been saved toward this goal, and a total of $84,000 is needed:

Current savings balance

Future amount desired

Number of years until needed

Annual increase on savings

Before-tax return on savings

Marginal tax bracket






0 is a nice, clean calculator you can use for quantifying short term goals. Just fill in the blanks for your particular goal. If you want to increase the amount you save from one year to the next, fill in that percentage under “Annual increase on recommended savings,” or input zero like I did.

You can use the “Marginal tax bracket” variable as well, but I like calculating what the expense will be without tax consequences, so I filled in zero.

Choose “Submit.” Admire the fancy graphics as you scroll past them to the “Detailed Data Table,” where it’s revealed you’d need to save $16,711 a year ($1,392.58 per month) in order to accumulate the needed $84,000 in 3 years. That’s a lot of money. How bad do you want that house?

Re-read your goal description for inspiration and then look over your monthly budget. If you want that house bad enough, you’ll make room. Or maybe you need to adjust a variable, like changing the “Number of years until needed” variable to 4 or 5 to make it more affordable?

Or maybe you continue to rent and instead pursue another goal(s)? You can’t really decide until you’ve quantified all of your financial goals and have a good handle on your spending habits.

Long term goal example

When quantifying your retirement goal, try using You’ll immediately notice you’re asked way more questions for this goal. Remember, the longer the term of the goal the more complicated it gets. Scroll down to read the help for all 12 variables.

One of the hardest questions to answer, especially if you’ve got decades to go until retirement, is what your “Annual Retirement Income” will be. Use your current yearly expenses. If you think Social Security will still be around when you retire, be sure and visit to calculate your estimated yearly payment. Include that amount under “Other Income.”

Current Savings?


Yrly Retirement Income?


Annual Yield?


Other Income?


Inflation Rate?


Current Age?


Current Tax Rate?


Retirement Age?


Retirement Tax Rate?


Withdraw Until Age?


Inflate Contributions?


Are Annual contributions Tax Sheltered?


Which goals to choose?

Which financial goals you choose to pursue is up to you. Most likely there’s a finite amount available after all the bills are paid. How much of your gross income do you save for your financial goals?

Strive to dedicate a minimum of 15%. Super-savers and higher wage earners can save an even higher percentage. The more discretionary income you can commit, the richer (financially speaking) you will become.

Defining crystal clear goals during the financial goal setting process gives you great incentive to become more thrifty and frugal with your less important discretionary expenses. Short of making more money, that’s where you need to look to fund them.

This makes having a method of tracking your expenses paramount. If you don’t already have some sort of data gathering device that tracks every penny, you need to get one.

A spreadsheet or software works fine. So does a notebook and pencil. Make it uncomplicated and simple to use, or give a try.

Customized investment plans

Once you’ve chosen which goals to pursue, you’re now ready for the construction phase of the financial goal setting process: assembling a customized investment plan for each of your financial goals.

Each goal should be assigned a plan with the proper amount of risk, given your risk tolerance and time horizon for each investment. This maximizes your return and helps protect you from the inherent volatility of the stock market.

Paramount to your plans will be a custom stock to bond ratio for each goal. Diversifying portfolio allocations on both the stock and the bond side is also important, as well as rebalancing portfolio allocations at least once a year.

Mastery of the above investment risk management strategies is by no means rocket science. You can do it yourself if you have the time and will. If you do need help, make sure you’re not paying too much for it and there is no conflict of interest.

Financial Goal Setting

There, that wasn’t so bad. You even made it through the math parts. Financial goal setting not only helps you make intelligent decisions regarding which goals to pursue, but also how to maximize your return and minimize risk.

Follow these financial goal setting strategies and watch your wealth grow!

Want more on goal setting? Check out Epic Goals.