How to set financial goals in financial planning

So, you’re at the stage in life where you need to get serious about money – welcome to the wonderful world of financial planning. It hits most of us around our late 20s/early 30s, but whatever age we are, it’s always quite daunting to begin with. You start hearing about interest rates and savings accounts and maybe even investments.

We tend to jump straight to this in a form of panic without even stopping to think what are the goals I want to achieve? What do I actually want? Instead, we run head first into trying to do 4 or 5 things to improve our money situation and ultimately, a lot of the time it fails. It fails because we don’t have a plan, and we don’t have a strategy, plus for most of us, we don’t have the financial education for financial planning, so I’m hoping this blog can change that for you.

So this guide is going to go through how to set financial goals for financial planning, helping you get off on the right foot with a strong game plan.

What are financial goals?

Financial goals are like your personal roadmap to financial success. They're specific, measurable targets that guide your money decisions and help you stay on track. These goals can be short-term (e.g., paying off credit card debt), mid-term (e.g., saving for a home), or long-term (e.g., retirement planning). Everyone has dreams, your financial goals are how you get to make those dreams a reality.

Why are financial goals important?

Bottom line, they’re important because before you know it, life passes you by. You don’t want to be mid 40s, having achieved nothing, with no money behind you. Sounds harsh, yes, but you’d be surprised at how many people want to get on the property ladder and have no idea how to d the financial planning it takes to get there. Or the amount of people I talk to that say; ‘I imagined I’d own my own home by now, enjoying lavish holidays with a comfortable savings pot for a rainy day’, and they are nowhere near it.

Building financial wealth takes time, it doesn’t happen overnight, so the sooner you start financial planning, the sooner you can be where you want to be. Setting financial goals isn't just a fancy exercise in personal finance, the goals are the compass that keeps you headed in the right direction.

Here's why they're crucial:

Security

The number one benefit of having financial goals is to build security for your financial future. Now, security means different things for different people. To you, it may mean having a strong pension fund for when you retire, to me, it may mean I have enough savings to escape to Greece for a week when I’m having a rough time, to our friend, it may mean having an emergency fund in case something unexpected happens. The bottom line is, money brings security. Without money, there’s not a lot you can do, so having goals in place to achieve said money is crucial. Goals give you something to work towards, keeping you motivated to save and invest.

Awareness

Setting financial goals forces you to look at your spending habits, alongside your lifestyle. It makes you more aware of how you’re spending your money, and the possibilities available to you if you decide to tweak your money habits. I remember when I first started to look into my own finances, and I realised if I made some lifestyle changes I could take more holidays. If you don’t know by now, the core of my soul needs to travel, so that was my biggest aim. If I was actively dealing with my money, I could do more of what I loved. This meant changing bits of my lifestyle, but that was easy when it made my ultimate goal more attainable.

Measurement

Another thing that hits most of us during our late 20s to early 30s (some even younger), is the comparison to others. Have you ever looked around and thought, well, George just bought a house, I can’t even afford to move out from my parents. Jess just had a promotion, so she’s booked a cruise around the Caribbean, meanwhile I haven’t been away for 3 years. Comparison to others is unfortunately very real and can leave you with a sinking feeling in the pit of your stomach.

Listen up, do not compare yourself to other people. Compare yourself to who you were 6 months ago to who you are now. When you create your financial goals and you stick to them, I guarantee you will be in a better place than before you put these in place. It will also help with that little voice in your head comparing yourself to others, as it’s not something we can just switch off, but it’ll help you not to dwell too much on it. Mentally, financial goals can help you so much, if you prioritise and focus on them.

Our relationship with money will be one of the most important relationships of our lives. Money is tied to everything, sad, but true. I’m not saying let it take over your life and be the be all and end all of your focus, but having a good relationship with money can push you to achieve your dreams, so let’s dive into setting financial goals.

Financial planning – How to set financial goals in 6

steps

Let's break down the process of setting financial goals step by step into a financial plan:

Step 1: Define your goals

Start by identifying what you want to achieve. I know what you’re thinking; ‘I want to do everything’. So did I. This is probably the hardest part, so I like to break these down into short, medium and long term goals.

Short term goals are goals within the next 12 months, this could be saving for a holiday, paying off credit card balances, or buying a new car. It could also be saving enough to move out and rent by yourself. Medium term goals are between 1 and 5 years; this could be building an emergency fund for unexpected events, saving for a house deposit, or taking a once in a lifetime stupidly expensive trip. Long term goals could be saving for later life, such as your children’s university, building a retirement pot or paying off your mortgage.

Everyone has different goals, nobody can tell you yours but you, so dig deep, and think of what you really want. Be specific and clear about your objectives, they can always change of course, but write them down in these categories to start planning your financial future.

Step 2: Quantity and set a timeline

The timeframes above are just a guideline, you need to determine how much you need to save for your goals, and when you want to achieve them. Setting a timeframe creates a sense of urgency and helps you track your progress. This is also always best to do when you know how much you can save. So for example, if you’re saving up for a new car which you know you need another £500 for and you’re able to save £200 per month, you need to decide whether the full £200 goes to your short term goals first to achieve that as a priority, or if you split that £200 and put a bit to short term, a bit to medium term, and a bit to long term, then how long would your goals take you?

Get your calculator out and write down different scenarios and how much each goal needs each month to keep going, this will help you determine how long it will take to reach your goals. This may also take you down the rabbit hole of cutting money elsewhere to push up that savings amount. Been there, done that. So if you want to create a budget to make sure every penny is accounted for, I have a blog for that here.

I also have some money saving tips.

Step 3: Prioritise your goals

Not all goals are equally important. Decide which ones should take precedence and focus on those first. This also goes for short, medium and long term goals. You may want to reach your medium term goal more than your short term goal, so if that means putting more money towards your medium term goal, then so be it.

Step 4: Create an action plan

Break down your goals into actionable steps. If you're saving for a home, your plan may involve saving a certain amount each month or reducing expenses. It’s also worth stating here that there are many, many different savings accounts available to help you reach these goals. From easy access savers to fixed term contracts, or even help to buy ISAs. I talk about the different savings accounts available here. It’s important to note that a dedicated savings account is definitely the way to go, you can earn interest on your savings depending on how you save, so that’s an added bonus. The blog above will explain all.

Step 5: Track your progress

Regularly review your goals and adjust your plan if necessary. This helps you stay on track and adapt to changing circumstances. This has happened to me so many times. I’ve planned to save for one thing, then 6 months down the line something comes up and I switch my focus to that. If you change your mind, that’s okay, just ensure that you continue to stay committed to your savings, so even if you change your mind 400 times on what you’re saving for, the money will still be getting saved at the end of it, so you can spend it on what you eventually decide on.

Step 6: Celebrate milestones

As you achieve smaller milestones on the way to your bigger goals, take a moment to celebrate. It'll keep you motivated and excited about your financial journey. Plus, if you reach your short term goals you can either then make new ones, or pool that money saved into your medium or long term goals.

Financial advisers – do you need one?

So, the big question. You know you’re getting older when you start to think about financial advisers, ha. So, a financial adviser, also known as financial planners, can be really helpful for wealth management, particularly if you are quite savvy with money and you want to make it stretch further. On the other hand, they can also confuse you and advise you to do things you don’t fully understand. There are many types of financial advisors out there, all doing pretty much the same job but in different ways, if you’re lucky to find a good one who has the patience to sit and explain things to you, that’s great, but there are some bad ones out there who just work on commission to sign you up to their products or products they are affiliated with, so be wary.

I would suggest here that if you’re new to personal finance, I would do some research yourself and learn the basics of personal finance. There are so many resources available online, this blog included, that help teach people the crooks of personal finance. When you’re confident in that, and you want to maybe turn your hand to investing or something along those lines, then it may be a good idea to talk to a financial advisor as they can help with an investment portfolio. As you get more successful with your financial plan they can also help with tax planning, retirement savings, health insurance, etc. Just be sure to know your risk tolerance before investing any cash.

I would always suggest never going in blind, educate yourself first to a basics level before diving into the deep end. Financial advisors can be wonderful, opening opportunities to you that you would never have otherwise heard of, but you also need to be able to understand what they’re offering you. Just ensure you find a reputable and trustworthy advisor who puts your best interests first.

So that’s how to set financial goals, as always if there are any questions please leave them in the comment section below. So, go get started, stay motivated, and you can turn your financial dreams into reality.

Cheers to a brighter financial future!

---

Disclaimer: Important Notice Regarding Financial Blog Content

The content on this financial blog is for informational and educational purposes only and should not be considered as financial advice. The authors are not licensed to provide financial advice in the UK.

Please consult a qualified financial advisor for personalised guidance. The information may not always reflect the latest regulations or market conditions.

Additionally, be aware that there may be affiliate links on this blog, which may result in the authors receiving compensation if you make a purchase through them. Use caution when clicking on such links. Your financial decisions are your own responsibility.

For tailored financial advice, consult a licensed professional in the UK.