Financial wellness is something we think a lot about. It’s something everyone wants, but the truth is, when we visualize financial wellness, our mental pictures naturally look different. Some of us think about breaking the cycle of living paycheck-to-paycheck, while others may be thinking about balancing their investment portfolio. For many, financial wellness is as simple as being able to enjoy doing the things they love without guilt.
While our versions of financial wellness may all look a little bit different, at the core most of us are looking to use our finances as a tool to address our basic needs, live the lives we want, and achieve our dreams.
Here are some best practices around how to examine your financial situation and set goals so you can build a strong foundation. Whether you’re just getting started, or you’re looking to achieve a new level of financial health, there are some steps you can take to set actionable financial goals.
How to set financial goals
1. Find your “why”
Think back to your picture of financial wellness. Is it tied to a particular goal or feeling? Use that to help ground your financial goals and keep you motivated to succeed.
If one of your goals is to pay down nagging credit card debt, think about what that will enable you to do, and frame your goal with that in mind.
Example: Pay down my high-interest credit card debt by the end of this year so I can put a down payment on a house I can grow my family in.
2. Assess your current situation
After thinking about your ‘why’, you may realize you have multiple financial goals, and aren’t quite sure where to start. In either case, taking a closer look at your financial situation can help you identify short, medium, and long-term financial goals.
Our Financial Fitness Score calculator is a useful tool to help you understand your financial situation relative to others, and how to improve it. Writing down everything pertaining to your finances–debt, savings, expenses, and income–is another tactic you may want to consider.
3. Determine your goals, write them down, and make them SMART
Once you’ve assessed your current financial situation, it’s time to set your goals. Some categories of goals you may want to consider include:
- Creating a spending plan
- Paying down high-cost debt
- Building up emergency savings
- Saving for retirement
- Investing in your future
Write down your goals, using the SMART goals framework: Specific, Meaningful, Achievable, Realistic, Trackable and Time-bound.
Example: Save $1,000 in a rainy day fund within four months in order to feel confident that I can handle an unexpected expense.
4. Check in on your progress, and celebrate wins
Schedule check ins on a regular basis to track your progress. Once you’ve crossed off one goal, move on to the next. Make sure to recognize your accomplishments and celebrate when you make significant progress. Each goal you check off of your list is an important part of your financial wellness journey.
