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Dollars and Sense: Setting and Reaching Financial Goals


If you had to choose between setting financial goals, and going to a music festival, you’d probably choose the music. But how would you pay for the entertainment? Goal setting may not be as much fun as a concert, but it helps you to save for and achieve exciting, fun and important things, like retirement or college.

Set Goals

The first step is determining your goals. Start by writing them down, and figuring out what’s post important. Do you prefer a trip to the moon in the next 30 years (hey you never know), or a down payment on a house in four years?


Once you know your goals and timeframe, you can calculate how much money you need to set aside monthly. 

Short-term goals can be reached in under a year. Unless inflation is high, it’s unlikely that the price will go up much in this timeframe. Once you know the total amount and target date, just divide the cost by the months until your goal date to determine your monthly savings target. Check that this works with your budget – and be realistic! If you can’t afford it, you’ll have to make changes, either with the length of time for the goal or cutting spending elsewhere. If inflation is unusually high, use the method for mid-term goals.

Mid-term goals take one to five years. For goals on the shorter end of the range, and low inflation, do the same as you did for the short-term goals to find out how much you need to save per month. For goals closer to the five year mark or during inflationary periods, you may want to take into account inflation and investment return the way you would with long-term goals. The math for the first method is much easier, but the second gives you more accurate numbers.

Long-term goals are goals that take more than five years to reach. These can be trickier to plan for because you may need to consider inflation and your projected return on investment. Once you determine what those might be, you can use a financial calculator to decide how much you’ll need to set aside every month.

Inflation: What you want today will likely cost more in the future. To figure out how much, decide the rate of inflation you will use. You can do research on what the inflation rate has been historically for your goal, but if you can’t find anything specific, you can use the general inflation rate over the last 5 years. Don’t worry too much about coming up with a precise inflation rate – even economists sometimes disagree on what to use.

Projected rate of return: It is a good idea to factor in the return that you expect to earn on your investments. For example, if you put money in a certificate of deposit (CD), you will be paid interest. If you invest your savings in stocks, the value of the stocks may increase over time, and you may also receive dividends. Some investments may come with a fixed rate of return that you know ahead of time. If your potential investment doesn’t have a fixed rate of return, you will have to estimate what you expect the return to be. One way to do this is to look at what the return has been in the past. Of course, that is no guarantee of future results. This isn’t an exact science.

After you set your goals and determine what amount you need to save each month to reach them, it is a good idea to consider if you can actually save that much each month. If your goal plan tells you to save $1,500 a month but your income is $1,700 a month, you definitely need to make some changes. To determine how realistic your goal plan is, start by comparing your current income and expenses. If there is not enough money in your budget right now to save what you want for your goals, consider if you can make any changes to your income and/or spending.

If you still fall short, you may have to rethink your goals. Is there a cheaper alternative available? Can you extend the timeframe? Are there any goals that are less important that can be dropped? Maybe you would really love to buy a $5,000 garden gnome but having enough money for retirement is a bigger priority.

Be flexible.

Your savings should be the first “bill” you pay each month. But what if you simply can’t keep up the monthly savings some months due to unforeseen expenses?  Consider it a temporary setback. With a little extra effort, you may even be able to make it up over the next couple of months. Or you may be able push out the date to achieve the goal. If you find yourself regularly unable to meet your savings goal, there may be deeper issues. Were you too optimistic with those overtime hours? Couldn’t give up your new video game purchases? Or perhaps the goal really wasn’t for you – you thought a new computer was vital to your happiness, but the prospect of owning it just isn’t giving you the thrill you anticipated. Revisit your goals and budget and make adjustments so that they are more achievable. Making changes and going with the flow of unexpected events is part of the processes!

By taking the time to set financial goals, you can go from wishing to having. And, along the way, be sure to touch base with the Credit Union for great budgeting tools, smart savings options and ways to consolidate and cut debt. We especially recommend a free Financial Wellness Check annually, rather like your annual medical checkup. Our relaxed, no-commitment Wellness checkup helps you identify low-hanging ways to earn and save more – and ensures you can avoid all-too-common financial pitfalls that can cost you dearly. Learn more.  

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