Financial Goal Setting

Before I get started on the breakdown of financial goals, I would like to start with a few words about goal setting in general:

The basis of any plan, financial or otherwise is having the end goal in mind. It is much easier to get to where you need to be when you have the destination set out for you. Once you have set yourself a destination, you can then break it down on how you get there. If you do not start with the end in mind, you could find yourself working tirelessly and going no where. If you do not have clear written goals, how do you expect to accomplish them?

There are several key principals that separate high performers, and wealthy people from people that don’t ever get ahead in life. One of the most consistent among them being goal setting. It is important to have goals in your personal life as well as a career. Whenever you are looking at your goals, you must make sure that they are in line with what YOU want. If they are somebody else’s goals, they will not resonate with you, and your determination to accomplish them will fade.  It is also important to review your goals regularly and make sure that you are on track or course-correct if necessary. There are a few areas I like to focus on when setting goals; Faith, Family, Fitness, and Finance. With this article,  I will be focusing on the Financial aspect of goal setting.

When you have your Financial goals set out, you are more likely to put money towards those savings rather than spending that money frivolously. One issue that discourages many individuals to save is the idea of personal identity and self-worth. Many people are used to having nothing in the bank, so when money is in there, it gets spent immediately. Even when they move to a better job, start making more income, get a better rate on their mortgage or loans. Somehow they are left with nothing in their account, basically living paycheque to paycheque… does this sound familiar? Maybe you know someone who has lived this way or is currently still in this rut.  Many people fall into situations like this without realizing it, just drifting through life, hoping it will “all work out”. Well if you don’t know what it “all working out” looks like, how could you possibly achieve that? Except of course, by fluke . That is why it is so important to have goals, and the belief that you can achieve them, and most importantly WORK TO ACHIEVE THOSE GOALS.

When setting yourself goals, it is helpful to remember the acronym S.M.A.R.T. which stands for:

When you use this system for setting goals, you will find yourself more likely to achieve said goals. It is much easier to achieve a goal like “ I want to weigh 200 LB by January 1st, 2025” rather than “I would like to lose some weight” what is Some? When are you looking to achieve that?…. When you leave all the specifics out of your goal, its almost impossible to achieve.

When setting financial goals, one of the most important things to focus on is the time-frame, usually these goals will fit into one of three categories (Long-Term, Mid-Term, and short-term). Annual financial planning will give you an opportunity to review your goals, update them and review your progress since the previous year; although the more often you can review your goals, higher your success rate will be in achieving them.

Here is a breakdown of financial goals from near-term to distant, and some of the recommended steps to take in order to live comfortably within your means and reduce money issues.

Short Term Financial Goals

Setting some short term goals can give you the confidence boost and financial knowledge you will need to achieve your larger goals. It would be very difficult to imagine an extra million dollars in your retirement account now, but if you were to sit down for a few hours and create a budget, you could start saving a decent emergency fund in a year. Here are a few short-term goals you can work on right away that will help you get on track to achieving the longer-term goals.

Establish a budget

“You cant get to your destination if you don’t know where you are right now” You may be shocked by how much money slips through the cracks on a daily basis and how that money could add up. Take a look at your monthly spending habits. What do you spend on your regular bills, what is spent on food, entertainment, subscriptions, etc?

Once you determine what you are spending on everyday expenses you can find areas to “cut the fat” and put more towards savings for things you actually want in the mid-long term.

After looking through your purchases, you might discover that going out with colleagues after work is costing you $20/day for 21 workdays. At the end of the month that ends up being $420 per month, or you could discover that you are paying for multiple subscription services that you do not even use. Once you see how you are spending your money you can use that information to guide how you want to spend going forward. You will want to ask yourself If the comradery of going out after work everyday is worth $420 per month to you? Or if the subscription services are something you NEED? If so, great! As long as you can afford it. If not, you’ve just discovered a way you can start saving every month. You can even limit your going out to just Tuesdays and Thursdays, you would be saving almost $300/month. Remember, if cutting something cold turkey is not going to work for you, don’t do it. You must make your budget something that you can actually do, otherwise you will not meet your budget and feel worse about the situation, thus having the opposite effect as was intended.

Create an Emergency Fund

An emergency fund is a money set aside specifically for unexpected expenses. To get started $500-$1000 is a good goal. Once that goal is met, you’ll want to expand it so that your emergency fund can cover larger financial difficulties; unexpected car repair, furnace or hot water replacement. It is recommended that you keep 3-6 months worth of expenses to cover your basic needs and financial obligations. This is helpful if there ever becomes an issue with your employment situation or you are unable to work for an extended period of time.

I would recommend opening a savings account like a TFSA with an automatic transfer every month for an amount that you determine when doing your budget, until you have hit the emergency fund goal. If you get a bonus or tax rebate, save it as soon as it comes in. If you wait till the end of the month, it is more likely that it will be spent rather than saved.

While you should have other goals too, like saving for retirement or a house, an emergency fund should be a top priority, as it creates the financial stability necessary to achieve your other goals.

Pay off Bad Debts

Experts debate on whether it is more important to pay off bad debts first or create an emergency fund. Some say that you should create an emergency fund even if you still have credit card debt because, without an emergency fund, any unexpected expense will send you further into credit card debt. Others say you should pay off credit card debt first because the interest is so costly that it makes achieving any other financial goal much more difficult. Pick the philosophy that makes the most sense to you, or do a little of both at the same time.

Whenever paying off credit cards, order them from interest rate highest to lowest. Pay only the minimums on all the cards, then put the remainder of the money or any additional funds into the card with the highest rate. This method is described as the debt avalanche. There are other methods to pay off credit cards, although this is one that I prefer as it minimizes the total amount of interest you would end up paying. Another option is consolidation loans or sometimes a balance transfer. There are a few credit cards that will offer 0% interest on balance transfers for up to a year*, so this can be very helpful if you are looking to get on top of your debt fast! I would always recommend talking to an advisor to see what options are available to you.

Debt negotiation can be an option for those with $10,000 or more in unsecured debt (Such as a credit card) who can`t afford the required minimum payments. Companies that offer these services are regulated by the Federal Trade Commission and work on the consumer’s behalf to cut debt by as much as 50% in exchange for a fee, typically a percentage of the total debt or a percentage of the amount of debt reduction, which the consumer should only pay after a successful negotiation. Consumers can get out of debt in two to four years this way. The drawbacks are that debt settlement can hurt your credit score, and creditors can take legal action against consumers for unpaid accounts.

*How not to declare bankruptcy*

Bankruptcy is also an option but should only be seen as a last resort as it destroys your credit rating for up to 10 years.

Mid-Term goals

Once you`ve created a budget, established an emergency fund, and paid off your credit card debt; or at least made a good dent in those 3 short-term goals. It’s time to start working toward mid-term financial goals, these will create a bridge between your short and long-term financial goals.

Get Life Insurance or Disability Income Insurance

Do you have a spouse or children who depend on your income? If so, you need life insurance to provide for them in case you pass away prematurely. There are a few types of life insurance policies from term life to whole and universal life plans. These insurance plans are used in different situations and can play a vital role in any financial plan. In a nutshell term Insurance is great for short term liabilities like mortgages or any debt load although it can be quite pricey later in life. The other options of whole and universal life insurance do provide coverage through your entire life but come with a larger cost on the front end. All these insurances protect your ability to produce an income and have their place in different situations. If you are interested to learn more, feel free to book an appointment to see what would work best in your situation.

Disability insurance will replace a portion of your income (up to 60%) if you become seriously ill or injured to the point where you cannot work. It can provide a bigger benefit than government benefits allowing you and your family to live more comfortably than you otherwise could if you lost your ability to work. There will be a waiting period between the time you become unable to work and the time your insurance benefits will start to pay out, which is another reason why having an emergency fund is so important.

Pay Off Student Loans

Student loans are a major drag on many people’s monthly budgets. Lowering or getting rid of those payments can free up cash that will make it easier to save for retirement and meet your other goals. One strategy that can help you pay off your student loans is refinancing into a new loan with a lower interest rate. But beware: If you refinance federal student loans with a private lender, you may lose some of the benefits associated with federal student loans, such as income-based  repayment, deferment, and forbearance, which can help if you fall on hard times

Consider Your Dreams

Mid-term goals can also include goals like buying a first home or, later on, a vacation home. Maybe you already have a home and want to upgrade it with a major renovation—or start saving for a larger place. College for your children or grandchildren—or even saving for when you do have children—are other examples of mid-term goals.


Once you’ve set one or more of these goals, start figuring out how much you need to save to make a dent in reaching them. Visualizing the type of future you want is the first step toward achieving it.

Long-Term Financial Goals

The biggest long-term financial goal for most people is saving enough money to retire. The common rule of thumb is that you should save 10-15% of every paycheque in a tax-advantaged account (Like a TFSA, RRSP, or Insurance Tax Shelter in Canada or a Roth IRA, 401K, or 403b account in the United States) But in order to really make sure you are saving the right amount you will need to figure out how much you will actually need to retire.

In our business we can actually help you find this number which we like to refer to as a FIN (Financial Independence Number) The $ value you would need at retirement to live comfortably though retirement based off the amount of withdraws and the interest you receive on this account.

If you are calculating this for yourself, you can do a quick calculation to see if you are on track for retirement.

  1. Estimate your desired annual living expenses during retirement. The budget you created when you started on your short-term financial goals will give you an idea of how much you require. You may need to plan for higher healthcare expenses in retirement.
  2. Subtract any income you will receive (Government Pensions, Social Security, retirement plans) This will leave you with the amount that needs to be self funded.
  3. Estimate how much $ will need to be in your investment assets by your retirement date based on the remainder of what is left needing to be paid after any income you expect to receive.

Many financial annalists use the 4% rule (withdraw 4% out of your retirement account every year in retirement) that is because it is the highest initial withdrawal rate for retirement that has survived ALL historical periods in U.S. market history, assuming a diversified portfolio of stocks and intermediate bonds. This means that in the worst markets we have seen, you could continue to withdraw 4% plus the rate of inflation and make it through any 30-year stretch without running out of money. In most cases, if you were to withdraw 4% annually you would actually end up with more money at the end of the 30 years.

Here is an example of how this could look:

A 55 Year old that wants to retire in 10 years
Desired Annual Living Expenses $50,000.00
Pension Plan $25,000.00
Remaining Needs (From Investments) $25,000.00
Total Investments Needed to fund remaining needs, assuming a 4% withdrawal rate (25000/0.04) $625,000.00
Current Investment Account $300,000.00
Additional Savings need over the next 10 years $325,000.00
  ($32,500/Year; about $2700/month)

So in this instance, this individual would want to start putting about $2700 per month into their retirement account to be able to live comfortable through their retirement. For simplicity, I have not included rate of return that would be earned over the next 10 years on the current investments. This would reduce the amount needed for contributions and is one of the reasons why it is important to review yearly. You may want to contribute more or less depending on the market.

There are many different vehicles you can fund for your retirement, and if your work offers a company matching program this can make a significant impact on funding your retirement. I would always recommend getting in touch with an advisor to see what financial vehicle would be the best fit for your situation.

Bottom Line

Things don’t always go according to plan, but the important thing is not to be perfect but to be consistent. If you get hit with an unexpected car repair or medical bill one month and can’t contribute to your emergency fund but have to take money out of it instead, don’t beat yourself up; that’s what the fund is there for. Just get back on track as soon as you can.

The same is true if you lose your job or get sick. You’ll have to create a new plan to get through that difficult period, and you may not be able to pay down debt or save for retirement during that time, but you can resume your original plan—or perhaps a revised version—once you come out on the other side.

That’s the beauty of annual financial planning: You can review and update your goals and monitor your progress in reaching them throughout life’s ups and downs. In the process, you will find that both the small things you do on a daily and monthly basis and the large things you do every year and over the decades will help you achieve your financial goals.

This is true of all goals, in essence: “the beginning of any goal is one step, in the right direction” If you would like to learn more about goal setting, financial planning or the tools available to you. Please get in touch with me at or feel free to book an appointment with me, using the link below!

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