Setting Financial Goals

A dream becomes a reality when it is turned into a goal. Goals keep you focused on the future, and they motivate you to accomplish your dreams.

Knowing exactly what you want to accomplish will be what you need to accomplish your goals. Setting goals will give you a long-term vision (and short-term motivation) to organize your resources—time, money, and talents.

What are your goals? Take some time to think about what it is you want to accomplish:

• During the rest of your college career
• Your first year out of college
• Five years after graduation

Is it to earn enough money for retirement, go back to school or buy a house? It's good to think big. You may have expensive pipe dreams you've never pursued because you've assumed they're out of reach (even if they're not). Or you may have priorities that don't match standard-issue financial goals.

Write Them Down

It's been shown time and again that the process of writing down goals, setting concrete time frames, and then developing a plan of steps to accomplish those goals leads to success. You are 10 times more likely to accomplish a goal if you write it down than if you don’t, says Shad Helmstetter in Who Are You Really and What Do You Want? Also, defining your goals will help determine your timeline and the options that make the most sense.

What financial goals do you have for your money? Write down some of your financial goals below.

Once you write them down, post them on the wall or your refrigerator, so you are constantly reminded of what you are working for.

Tool: Financial Goals Worksheet

Use our Financial Goals Worksheet to define your goals and create actionable steps to achieve them.

Defining Financial Goals

Depending on the time frame it takes to reach one of your goals, it can be considered a short-term, medium-term, or long-term goal.

• Short-term goals are those that can be achieved in a year or less. As an example of this, you might want to save $100 to buy an MP3 player in three months.

• Medium-term goals are those that will take between a year and three years to achieve. For example, you might save for a vacation next year.

• Long-term goals take more than three years to accomplish. One of your long-term goals for after graduation could be to pay off your student loans early by paying an extra $200 per month.

If you need help brainstorming some short-term, medium-term, or long-term goals, visit RealWorld101.org/Defining-Financial-Goals

Clarifying Your Goals

Deciding on your goals is an important first step. To make progress toward achieving your goals, it's helpful to turn them into S.M.A.R.T. goals. S.M.A.R.T. goals are: Specific, Measurable, Attainable, Realistic, and Time-bound.

Let's say one of your medium-term goals is to go with your friends to San Diego for spring break. Here's how to make this a S.M.A.R.T. goal.

Specific: A specific goal is, "I want to spend spring break in San Diego with three friends." A vague goal, for comparison, is more like, "I want to do something fun over spring break."

Measurable: You need $500 for your share of gas money for the drive to San Diego and back, your share of the split hotel room cost, and food for the week. This is more concrete than, "I need money for the trip."

Attainable: It's October, so you have about five months to save for your trip in April, and you'll save the money from your Work-Study job. You'll need to save $100 per month, or $25 per week, to go on the trip. You are more likely to see results with this goal than if you say, "I'll save any money that's left over at the end of the month."

Realistic: You and your friends will drive the 1,000 miles in 15 hours, splitting driving time between the four of you. An unrealistic goal is more like, "We'll make the trip in a day."

Time-bound: You'll have 75% of the money saved by March. An open-ended goal is more like, "I'll have the money by early spring."

This is just one example of a S.M.A.R.T. goal. You can use this idea with all goals, for both money-oriented ones and those that are not.  Well-defined goals make it easier to create effective strategies to achieve them.

This is an excerpt from Managing Your Money After College Guide which is included in our Real World 101 Care Packages. Visit our Care Package page to find out how to get one for yourself or for a lucky college grad!