Setting financial goals

PF101: Introduction to Personal Finance & Goals

PF101: Class On the Basics of Setting & Acheiving Financial Goals

If you’re just stopping by for the first time, this is the first class in a series of classes over the next few months which will culminate in the development of a complete financial plan.  Stop by the orientation class HERE first for class orientation/overviews and HERE for more information about the website.

Class Objectives: To understand the need for a financial plan and develop preliminary financial goals
Prerequisites: none
Handout: Financial Goals Summary (preview at end of lecture)
Assignment: Download and complete your Personal Financial Goals in Excel | Google Docs (previews in lecture material)


Welcome to our first class!  Humor me for a minute while we do a quick exercise to start out.
Imagine these scenarios:

  • A bill comes in the mail that you weren’t expecting
  • You need to make an emergency visit due to an injured family member in another state
  • You file your tax return and instead of getting the refund you were expecting, you actually owe the IRS money
  • Your credit card company sends a letter that the interest rate is increasing on your credit card account
  • It’s December and the furnace stops working in your home
  • The economy has another downturn and you unexpectedly lose your job

With your current financial situation do these scenarios make you panic or do you feel like you could handle them?  The Federal Reserve does an annual study on the “Economic Well-Being of U.S. Households” and found that 47% of people responded that they could not cover an unexpected expense of $400 or greater without borrowing money or selling something.  Furthermore, many professionals estimate that most Americans are only 2 paychecks away from homelessness.  Our culture encourages us to spend now, have as much as we can afford the payments on and plan for the future later.  But we also live in a country that is so wealthy and has so much opportunity that we can take control of our situations and create stable financial futures starting right now.

Let’s imagine that future instead:

  • You have an emergency fund that gives you peace of mind in the event that any of the unexpected emergencies listed above arise (and they will)
  • If you use your credit card, you are able to pay it off in full each and every month without fail
  • You and your spouse don’t fight about money because you both follow the same spending plan and have the same goals for where you want the money to go each month
  • You are debt-free, except for your mortgage, which you have a plan to pay off early within the next 5-10 years
  • You are setting money aside each month to cover future expenses such as a new air conditioning unit and braces for the kids that you know are coming up in the next few years
  • Not only are your expenses covered now, but you are confident that with your current spending and saving habits, you will be able to help your children with college expenses and be able to retire comfortably without reducing your lifestyle!

China Visit with Yan Jing - Setting Financial GoalsARE AMERICANS REALLY RICH?

It wasn’t until my family had the opportunity to move to Asia several years ago that I realized just how bad the financial situation is overall in our country.  During a year of living in China, we were surrounded by poverty.  Just a block outside of our expatriate compound, there were families living amid trash heaps, sorting through piles for recyclables and re-usables that they could sell for the equivalent of pennies.  We had an amazing driver there that became part of our family.  She invited us to her home and it was obvious that she was much better off than millions of other Chinese people in the city.  It was a modest, approximately 700 square foot apartment on the 6th floor (no elevator!), but clean and tidy and well-maintained.  Her and her husband had purchased the apartment with cash after they had saved and saved from their small wages as taxi drivers in the city, which couldn’t have been more than a combined total of about $500-600 dollars per month.  Their apartment was currently worth over $10,000 and was a huge investment for them.  They had money in savings for the future and were able to buy healthy groceries and go out to eat at nearby restaurants, buy nice-looking clothing, and even buy a new Macbook Air computer and iPhone for their beloved only daughter (that one child policy made for some spoiled kids!) who was starting college that year!  All without ever having any debt.  They were arguably more “rich” than millions of Americans that on average make almost 10 times or more per month, yet have a negative net worth due to excessive debt.  Actually, if we think about it, those in the U.S. with excessive debt and negative net worth are less wealthy in total than those living in extreme poverty conditions all over the world, who own very little but owe nothing, essentially having no net worth.

These are traits of people that are financially secure:

  • They don’t spend money they haven’t earned yet
  • They sacrifice to save a portion of their current income to make sure they can meet unexpected needs in the future
  • They don’t spend money on cheap, unnecessary items (let’s all agree to blame the Target dollar bins, okay?)
  • They don’t treat shopping as a hobby, but to purchase items that are necessary
  • They aren’t competing against others to have more or nicer material things (the Jones’ of course)
  • They know that things don’t make people happy-things that make you happy do not cost money
  • They don’t buy unnecessary convenience items
  • They live in modest homes/apartments that don’t consume a large portion of their monthly income

It’s time for Americans to turn our financial futures around and use our money to give us financial freedom and create more happiness in our lives.  A financial plan will help us to take an honest look at our current financial situations, goals and steer us to where we want to be.


So, on to the importance of making goals to make our intentions a reality!  My grandmother always said that if you don’t write down a goal, it’s only a wish.  You’ve probably wished you had more money, wished you had a plan for retirement, wished you could get rid of your debt.  Wishing isn’t enough, so start writing!

Making goals is the absolute most important step out of every single thing we will be learning in the next few months.

In order to get on the right track to even begin your financial plan, you need a purpose for spending all of this time and effort.  You need specific, attainable goals and then to track them consistently.  You need to imagine all the benefits of being financially secure and how this is going to be more than just not living paycheck to paycheck, but being able to create stable and intentional lives for yourself and your family to promote happiness and security in your life.

If you haven’t reached this point where you are 100% ready and passionate about getting your finances in order, I highly suggest that you first read the book Your Money or Your Life by Vicki Robin.  She has a fantastic program laid out in the book which includes calculating your “real hourly wage” by taking your income from your job, subtracting all work-related expenses and dividing it by all of the hours your job demands-not just hours actually at the job, but also commuting hours, work meals, escape entertainment, time off for job related illnesses and more.  She uses this “real hourly wage” as the basis for changing our mindset from focusing on how much money we’re earning and spending to how many hours of “life energy” our jobs are taking up and how many hours we are truly spending on excess material goods that aren’t adding satisfaction in our lives.  Beg, borrow or steal this book (or just buy it) and read it!  It will totally change your view about the role of money in your life.  You will be ready to set financial goals and stick to them to improve your life.


FIRSTmake a list on any piece of paper (any old recycled piece of paper will do friends!) of all of the goals you have-regardless of whether or not they are financial goals-for now and in the future.  Even non-financial specific goals generally use financial resources or have an impact on them in some way.  One way to do this is to imagine your life one year from now, five years from now and 20(ish) years from now.  The handout for this class (previewed at the end of the lecture) can help you to get started if you need some ideas.

Consider the following questions when you are completing this exercise, starting first for all non-financial specific goals that you can think of:

  • What do you love doing? What hobbies, interests and sports are you involved in? (ex. water skiing, boating, shopping at the mall)
  • What do you want to be when you grow up-even if you are already a “grown-up”? What are your personal career goals?  (ex. job certifications, additional education, starting your own business)
  • What are some things that you’ve always wanted to do that you haven’t done yet? (ex. learn a language, start a nonprofit organization)
  • Where do you want to go? Do you love to travel or have family that lives far away? (ex. family vacations, mission trips)
  • What projects do you currently wish to complete or things you need to purchase that may require resources? (ex. home improvements, restore an old car)
  • Are there any major life events in the foreseeable future you need to plan for (ex. marriage, children, divorce)?
  • How do you plan to live in retirement-luxury, comparable to current living, or budget? Do you hope to travel or have any other goals for your retirement years?  How old do you want to be when you retire? (ex. retire to a foreign country to lower expenses, spend a year-long trip traveling around the world, live in yacht)
  • Are there any other non-financial goals you can think of that require financial resources?

And now consider your financial-specific goals:

  • Do you have adequate cash to cover emergencies?
  • Do you have excessive debt you need to get control over?
  • Do you have any major purchases planned, such as cars, boats, art, etc.?
  • Do you think that you are adequately covered by your insurance policies-home, auto, rental, etc.?
  • Do you feel that you are saving sufficiently for retirement and beyond?
  • What are your investment and savings goals?
  • Do you plan to personally pay for your children’s college educations with/without student loans?
  • Do you want to leave an estate for your heirs?
  • Do you plan to leave charitable bequests to your favorite charities?
  • Do you have disabled children that need to be specially provided for or aging parents that will need to be supported?
  • Are there any other financial goals that you have?

SECOND, after you have carefully considered all of your goals, take your paper and use the spreadsheet (yep, this is homework to be downloaded at the top of the post!) to organize them into short-term, intermediate-term and long-term goals depending on their timing.  Above is a preview of the spreadsheet.  For examples of financial goals in each of these categories, download the class handout at the bottom of the lecture. Short-term goals are one year or less, intermediate-term goals are 2-5 years and long-term goals are greater than 5 years.

Personal & Financial Goals Spreadsheet (Short-Term, Intermediate-Term, Long-Term)

THIRD, rank the goals in each section according to priority, meaning how they rank compared to other goals in that time range.  Most (all of us reading this I would bet!) have limited financial resources, so this is an important step.

FOURTH, assign a cost estimate for achieving the goal and amounts you’ve already saved toward the goal.  This may possibly be the most time-consuming phase of the goal-setting process.  We will talk more in future classes about how much to plan for life insurance needs, college savings, and retirement savings, so just put in preliminary estimates and don’t get hung up too much on this phase.   You will be re-visiting your goals throughout the process of creating your financial plan to revise them and re-prioritize them with the financial resources you have available and after you’ve educated yourself more about the details of each aspect.

LAST, create a detailed plan for achieving the goal.  Be as specific as possible about all the steps and resources you need in order to complete the goal.  Examples could include sacrifices you are willing to make, vacations you can postpone, expenses you can reduce, consolidating debt, selling items to raise the funds, doing home improvements yourself, getting a temporary part-time job, etc.  There is an additional tab in the file that can be customized to track the progress of your goals throughout the year(s).

Annual Financial Goal Tracker (Short-Term, Intermediate-Term, Long-Term)

Don’t forget about the SMART acronym for making goals (Specific, Measurable, Attainable, Realistic, Timely).  Once you’ve mapped out your goals, you have a foundation on which to build the rest of your financial plan to make sure everything you do aligns with the things that are important to you.


Meet your new {imaginary} BFF’s Jim and Mary Smith who have embarked on the journey to educate themselves about their finances and are committed 100% to making and reaching their financial goals.  They are a typical, average American family and they live in Michigan.  Here’s their stats:

Smith Family Example Picture

Name: Jim
Age: 32
Occupation: Real Estate Agent
Annual Salary: $56,000

Name: Mary
Age: 31
Occupation: Part-Time Dental Hygienist
Annual Salary: $23,000

Name: Emma
Age: 5
Occupation: Kindergartener
Annual Salary: paid in grades

Name: Jacob
Age: 2
Occupation: Pro Mess-Maker
Annual Salary: paid in hugs and kisses

The Smith’s make an adequate living, but they know that they aren’t where they would like to be financially.  They want to create a financial plan that will improve their quality of life and be able to focus on spending their money more intentionally and saving for the future.  Following the 5 steps listed above, they set their preliminary financial goals.

STEP 1: Make a draft list of all your goals.

Smith Family Example Financial Goals

STEP 2: Organize them on the spreadsheet into short, intermediate and long-term goals.

STEP 3: Rank the goals in each section according to priority.

STEP 4: Assign a cost estimate for achieving the goal and amounts you’ve already saved toward the goal.

STEP 5: Create a detailed plan for achieving the goal.

Smith Family Example Short-Term Financial GoalsSmith Family Example Intermediate-Term Financial GoalsSmith Family Example Long-Term Financial Goals

Now it’s your turn to take your very first step and create your goals.  Good luck and don’t lose sight of what you have to gain!  It’s going to be a lot of work, but we’ll do it together a little bit at a time!


Your homework assignment is to follow the 5 steps listed above to brainstorm, organize and make a preliminary action plan for your financial goals.  This assignment is expected to take a total of 2 hours.  If the level of commitment you can put into this varies (see this post) follow this plan:

  • IMPROVING-Brainstorm all the financial and non-financial goals that you can think of and write them on a piece of paper.  Put in the front of your financial binder or hang them on your wall.
  • INVESTED-Follow the steps listed above, making and prioritizing your goal.  Put in the best estimate/guesstimate you have for what the cost will be for your goals and what you need to accomplish them.
  • UNSTOPPABLE-Follow the steps listed above, spending time to research as best you can the cost estimates for your goals and explicitly state what you are planning to do to accomplish each goal in detail.  Re-visit your goals on a monthly basis and adjust them.

File your financial goals in your Financial Plan binder under Tab 1-“Financial Goals”.


Here’s a preview of the handout to help brainstorm goals with a summary of the steps to reference while you work on your goals.  Click on the picture or on the link at the top of the post to download.

P101: Steps in Financial Goal Planning, Examples of Short-Term, Intermediate-Term and Long-Term Financial Goals

 What are some of your financial goals?




I’m Kathryn Hanna-wife, mother of 3 and a Certified Public Accountant. I love to budget (really, I do!) , build spreadsheets and spend money on travel, sewing supplies and good chocolate.


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