How To Set Savings and Financial Goals

A Successful Financial Plan Starts With Clear Goals

person in gold t-shirt looking at paperwork in a glass office

Rowan Jordan / Getty Images

Saving money matters when it comes to leading a richer financial life. Having money in the bank can make it easier to weather emergencies or to realize your dream of owning a home. Setting clear money goals is the first step in making savings a regular part of your financial routine.

Why You Need Financial Goals

Setting financial goals allows you to put hopes and dreams into action. It starts with choosing a goal, then developing a plan for achieving it. For example, the Consumer Financial Protection Bureau advises using the SMART goal-setting system. It requires your financial goals be:

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Timebound

Outlining money goals this way can give you the direction and the motivation you need to follow through on them. Here’s what a SMART goal might look like for an emergency fund:

  Question Answer
Specific What are you saving for? An emergency fund
Measurable How much do you want to save? $3,000
Attainable Is this a reachable goal? It is if I earn more, spend less, and plan.
Relevant Why is this important to you? I need to be prepared for surprise expenses.
Timebound When do you want to reach the goal? In 12 months

Action To Take: Set Two Savings Goals for This Year

When setting financial goals, less can be more. Set too many goals and you may feel completely overwhelmed. That could lead you to give up before you begin.

If you're not sure what to focus on with your money goals, there's a simple way to approach it. Choose one financial goal you can achieve in the short term, and one money goal to focus on for the long term.

Short-Term Financial Goal: Build Emergency Savings

An emergency fund can be a lifesaver when you have an unexpected expense. According to Federal Reserve data, 30% of Americans wouldn't be able to cover a $400 expense using cash or its equivalent.

If you don't have a rainy-day fund or you've depleted yours, saving for emergencies should take priority over other savings goals in the short term. First, determine how much you need and want to save.

For example, you may want to save three- to six-months' worth of expenses. Or you may choose to save a set dollar amount. You could then break that goal down to determine how much you need to save each month to achieve it. So if you want to save $3,000 for emergencies in the next year, you'd need to aim for $250 in savings each month.


A savings goal calculator, like this one, can do the math for you.

Long-Term Financial Goal: Think Big

When setting your second money goal, consider what you want to accomplish in the next five, 10, or even 20 years. For example, you might want to buy a home. So saving cash for a down payment and closing costs could be your big money goal. Or you may want to stash away money for retirement instead.

When setting longer-term financial goals, start with a set dollar amount. Next, work backward to figure out what you need to save monthly or yearly. For example, if you want to save $20,000 toward a home over the next four years, you'd need to save $5,000 each year. That breaks down to $416 and change each month (not counting interest or investment gains).


As you set your short- and long-term financial goals, consider where to keep your money. A high-yield savings account, for example, could help you earn more interest on your emergency fund compared to a regular savings account. Opening a CD or creating a CD ladder might be preferable when saving for longer-term goals.

Next Steps and More Resources

Setting money goals is an important link in the chain when working toward financial wellness. Once you've set some broad goals, you can work on fine-tuning them. For example, you next can turn your focus to building short-term savings for the fun things in life, as well as the occasional curve ball.

Keep reading to learn more about the benefits of saving:

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. "Setting a SMART Saving Goal."

  2. Federal Reserve. "Update on the Economic Well-Being of U.S. Households: July 2020 Results."

Related Articles