How to Set Long-Term Financial Goals

If you’re looking for ways to be financially independent, setting a long-term financial goal is a critical first step. Read on to learn more.

Financial Planning
January 13, 2023
How to Set Long-Term Financial Goals

As we write this, many readers have likely begun to ponder their New Year's resolutions — while others might have only just been reminded to do so. And while whether you hold true to your resolutions or not will be up to you, setting and attending these so-called “goal-setting appointments” can, at the very least, be a way to take some personal inventory going into the next calendar year. Taking the time to prioritize your mental, physical, social, or financial wellness and the improvement of all four will give you a rolling start as you embrace some new year newness. If you’re reading this after the ball has dropped (or well before, depending on how you look at it!), don’t fret: there’s no wrong time to begin setting goals. 

But as you set these goals, be they as part of your New Year’s ritual or otherwise, we encourage you to think not just about the year to come but about the many years ahead of it. In this article, we’ll help you set long-term financial goals before introducing some actionable steps to achieve them. From there, it’s up to you.  

What is a Long-Term Financial Plan? 

Long-term goals may be different depending on one’s situation, but generally, these goals refer to accomplishments that may take five or more years to attain. Things like buying a house, paying off a student loan, achieving a high credit score, or funding an early retirement are examples of long-term financial goals. However, the list of potential long-term goals is virtually endless. 

To accomplish these goals, some may set aside an odd $200 per paycheck to pay down a credit card or apply towards an emergency fund. But while this may be an effective way to accomplish a variety of long-term financial goals, strategic thinkers will establish a long-term financial plan to achieve these goals with maximum efficiency. Assembling this plan will help you find ways to break down large goals into smaller ones, making seemingly impossible financial feats completely manageable with a healthy dose of discipline and some consistency to match. Below, we’ve outlined some of the key components of a long-term financial plan. 

Establish a Budget 

In order to put together an effective and accurate long-term financial plan, you’ll need to have a solid idea of what your existing finances look like. Create a breakdown of your everyday expenses, categorized by necessities and luxuries (or wants and needs), ensuring that virtually every dollar is accounted for. Free services like Mint can help with itemizing or learning how to start a budget –– and making sure that micro-transactions ($5 cups of coffee, streaming services, etc.) are taken into consideration, as these seemingly minor fees can add up over the course of a year. 

If you haven’t put together a budget in some time, you may find that significant percentages of your paycheck are being wasted without oversight; these funds can be easily diverted toward securing your future. Should you uncover places where you can “trim the fat” (like entertainment spending, meals out, or those all-too-regular trips to Starbucks,) identify ways that these resources can instead serve your long-term goals.  

Set Realistic Goals 

With a clear understanding of your existing financial situation, you can begin to recognize areas of your own financial profile that are in need of improvement. If you discover that $100 is being unwittingly diverted toward monthly credit card interest payments, consider integrating a debt repayment plan into your long-term financial goal sheet. 

When setting your long-term goals, you might find the most success adhering to the S.M.A.R.T. principle: goals that are specific, measurable, attainable, relevant, and timely. Using these parameters to shape your long-term financial goals will ensure that your key objectives are grounded, focused, and within reach. If your goal is to “save more money,” determine what your reasonable monthly or bi-weekly savings might be and be uncompromising in your pursuit of that figure. 

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Save for Emergencies 

You’ve accounted for every dollar that goes in and out, set goals that are in service of the bigger picture, and continuously made strides toward the future you want — but if you’ve failed to account for the unexpected, you might find all of your forward momentum sapped in an instant. Therefore, any ironclad long-term financial plan is incomplete without an emergency fund. In this case, emergencies can be anything from unplanned hospital expenses to the sudden loss of income, but with a properly funded emergency surplus, you can ensure that your hard work hasn’t been in vain. So, consider setting an emergency savings goal to help. Many financial experts suggest setting 3-6 months of expenses aside; your predetermined budget will be instrumental in determining the size of your fund.1 

Revisit and Adjust Your Plan Frequently  

As mentioned above, a long-term financial plan may be put in place to wipe out student loan debt, purchase a home, or increase net worth. When implementing this plan, however, remain open to the fact that goals (and your situation) will likely change, and a long-term financial plan should change with them. Things like an increase in salary, the birth of a child, or unforeseen emergencies can dramatically change the trajectory of your future — and keeping your plan updated will ensure you’re still on the quickest path toward your long-term goals.  

How Do You Set Long-Term Financial Goals? 

We introduced the idea of setting S.M.A.R.T. goals in the section above, but these are more like guardrails for your goals than actual goals themselves. To set your long-term financial goals, you’ll have to zero in on what it is you hope to accomplish with your resources — money and time. For some, the ultimate long-term financial goal might be simply to get out from underneath crippling student loan debt. For others, they might be exploring ways to create (and preserve) generational wealth for children, grandchildren, and so on. No matter what boat you’re in, here’s how to apply the S.M.A.R.T. principle toward setting long-term financial goals. 

Set Specific Goals

In order to accomplish your goals, you need to first know exactly what that goal is. Having a blanket goal, like wanting to buy a house, may keep you on the right path toward achieving it. But the more specific you can be, the better your odds of success are. By factoring in your budget, lifestyle, expenses, and savings, you should be able to come up with a far more specific version of this same goal (i.e. I want to buy a $400,000 house in five years.) 

From here, you can begin to segment this goal into smaller goals: Collecting a $40,000 down payment, obtaining an 800 credit score, and eliminating existing debts. These goals can be as granular (saving $700/month for a down payment, never making a late credit card payment, etc.) as you need them to be. 

Make Them Measurable 

Just as a good hypothesis is testable and repeatable, a well-crafted goal should be measurable. As they pertain to long-term financial objectives, measurable goals are ones that can be tracked and adjusted in the event that they aren’t being met. In the above example, someone’s primary long-term goal is to purchase a house; in the short-term, they’re making monthly contributions toward the larger sum. Without a measurable goal, their objective is to simply buy a house. They may be able to measure the amount they make in monthly contributions, but all perspective is lost without knowing how close (or far) they are with respect to their dream home. 

Lead with Attainable Goals 

Long-term goals are inherently ambitious; most of us can’t fund our retirement overnight, nor can we buy a house on a total whim. Ambitious as they may be, long-term goals are still attainable with proper planning and execution. It’s when these ambitious goals become borderline lofty that many goal setters begin to struggle. 

With an ambitious, specific, and measurable goal, you can chip away at the larger goal until what was once a dream becomes a reality. But if a goal is far enough out of reach, these smaller chunks might still be gargantuan and –– disheartened by the failure to make forward progress –– many will abandon the grandiose goal altogether. In other words: Don’t be afraid to dream, but keep your dreams grounded in some reality.   

Keep Them Relevant

When setting long-term financial goals, it can be challenging to imagine what your situation might be like five, ten, or even 20 years from now. But despite the “guessing game” you might have to play to set goals this far out, be sure to keep your smaller goals relevant to your primarily long-term goal. While wiping out chunks of debt may serve both an aspiring homeowner and a wishful retiree, achieving a high credit score may only truly be relevant to the former. A high credit score is a valuable asset, but it’s not in direct service to someone building a retirement fund. And with limited time to accomplish long-term financial goals, it’s crucial to stay focused on the things that will help you do so. 

Consider Timeliness 

On the subject of limited time, the final strategy for setting long-term financial goals is making sure that time is taken into consideration. The timeliness of a long-term goal is important for two reasons. The first reason is that, without clearly defined time constraints (five years to buy a home, 25 years until retirement, paying student loans off 10 years early), there is little sense of urgency to inform your approach to accomplishing said goal(s). 

As for the second, timing will help you prepare for other milestones which can coincide with the pursuit of your long-term goal. Say you decide today that you plan to retire in 25 years, noting that in 10 years, you’ll have a child going off to college. By making note of this now, you can make any necessary preparations to ensure that you remain on track and that your family obligations are being met.   

What Are Some Ways to Achieve Long-Term Financial Goals? 

As involved as this process may seem, establishing long-term financial goals is the easy part. It’s the constant attention to these goals and the sometimes significant lifestyle adjustments required that throws many people off. With that said, if you’ve followed the above steps for creating long-term financial goals –– and consider the below when pursuing them –– these goals will be well within reach. 

Set a Clear Intention and Determine Your Motivation 

A goal is one thing. An intention is another. When pursuing your goals, before breaking down large goals into smaller ones or diving into the minutiae of prioritizing tasks, take some time to clarify exactly what it is you’re after. Is it financial freedom? Is it a home of your own? Is it the comfort of knowing you and your family are prepared for an emergency? Only you can decide your motivation(s), but once you do, you’ll be better equipped to achieve your long-term financial goals. 

Prioritize Your Goals 

Time and money are both finite, and there’s a likelihood that you won’t be able to accomplish all of your long-term financial goals in one fell swoop. But it’s important to remember that this isn’t an all-or-nothing pursuit; you’re still in pursuit of your long-term financial goals, even if one has to be brushed to the side. The simplest instance of this might be the goals of compiling an emergency fund and saving for a down payment. Without an emergency fund, any savings for a down payment will likely be diverted toward covering everyday costs in the presence of unforeseen circumstances. Therefore establishing an emergency fund (and protecting your future down payment) should be your top priority.  

Give Yourself Grace

One of the biggest ways that people fail on the path to achieving their long-term financial goals is by not being flexible and accepting that slip-ups happen. Maybe holiday spending limits the amount you’re able to contribute to your savings this month, or a string of celebrations has maxed out your budget and forces you to dip into savings. No matter the circumstances, give yourself a bit of grace and use these missteps as reminders to refocus on your long-term financial goals. 

Whether you’re looking to get out of debt, planning to buy your first home, improving your financial literacy, striving for financial independence, or fantasizing about retiring on a sun-soaked beach, setting long-term financial goals will help you get there. For more money-saving and family financial planning tips from Truehold and to start building the future you deserve, browse our resources!  

Sources: 

1. Wells Fargo. Saving for an Emergency. https://www.wellsfargo.com/financial-education/basic-finances/manage-money/cashflow-savings/emergencies/

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