How to set financial goals

In 2022, UK citizens collectively deposited £55 billion in banks and building societies. Despite this, approximately 56% of working-age adults in the UK are considered "inadequate savers."¹

This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.

To many, the path to financial freedom and security may seem tricky, but there’s one crucial strategy that can help: learning how to set financial goals.

Whether buying a home, retiring comfortably, or simply saving for a rainy day, having clear financial objectives may better guide short- and long-term decision-making.

Potential tips for setting financial goals

For those who have never sat down and carefully reviewed their income and expenses, setting financial goals can be overwhelming.

These general tips may be a good starting point:

• Identify goals and priorities: Start with a realistic review and highlight financial priorities to work towards.
• Be specific: Vague goals are hard to achieve. Instead of, "I want to save money," consider something like, "I want to save £1,000 for an emergency fund."
• Set a timeframe: Whether short term (within a year) or long term (more than a year), having a timeframe can help someone maintain focus.
• Create a budget: Tools like expense tracking may help with resource allocation.
• Review regularly: Life happens — and goals may need to be adjusted. Regularly review them to ensure they are still relevant.

Types of financial goals to consider

Knowing what financial goals to work toward can help provide a sense of direction and purpose when planning.

Some common examples of financial goals include:

• Reducing debt: Paying off loans or credit cards.
• Making purchases: This can include both minor and major purchases.
• Planning for retirement: A step-by-step approach can be helpful when starting to think about retirement.
• Preparing an emergency fund: Slowly building up a financial cushion can help alleviate stress from unexpected expenses like medical emergencies.

When considering financial goals, it may be helpful to include both long-term and short-term ones. Long-term goals usually require a commitment of more than a year and typically involve large sums of money. Meanwhile, short-term goals can typically be achieved within a year and are often stepping stones towards long-term goals.

Everyone’s financial goals will differ depending on their individual circumstances. Take a step forward with financial goals by being realistic and being open to adjusting when situations change.

How to stick to financial goals

Staying committed to a budget or savings plan may be challenging. These potential tips may help individuals keep financial goals within sight:

• Visualise the end goal: Start small and keep a mental image of what achieving the goal could feel like.
• Celebrate milestones: Achieved a mini goal? Don't just tick it off the list — celebrate it with a small treat.
• Find a financial buddy: Sometimes, accountability can make all the difference. Consider sharing goals with a friend or family member.
• Automate savings: Setting up automatic transfers to a savings or investment account could remove the temptation to spend.
• Use a financial app: There are numerous apps designed to track financial goals and offer insights into spending habits.
• Reassess goals: Periodically review and adjust goals as needed.

In addition to setting financial goals, personal budgeting can be a useful tool to implement. Learn more here.