Guide to setting financial goals

Everyone’s financial situation is unique, which means your goals should be tailored accordingly. Take a look at your current earnings, any unpaid debts, or other commitments like mortgages and regular investments. Once you have a clear picture of your finances, work out how much you could realistically afford to put aside.

Once you know what you’re working with, it’s time to decide where to focus your efforts. For example, this could be working towards buying property, paying off larger debts, or reaching a specific retirement pot goal. If you have more than one ambition in mind, great, but try not to overpromise yourself. Start small and work from there.

SMART goals help you stay on track and keep things relevant. The acronym stands for:

• Specific. Clearly decide what you want to achieve – e.g. how much you want to save and what for.
• Measurable. Ensure your goals’ progress can be tracked – e.g. saving a certain amount each month.
• Achievable. Make sure your financial goals are realistic, considering your financial situation.
• Relevant. Create goals that are relevant and useful to what you want to achieve – do they align with your plans for the future?
• Time-bound. Set a deadline for when you want to achieve your financial goals.

If you decide to work towards more than one goal, some will likely be more pressing than others. Decide which are more urgent – for example, you may want to focus on any short-term goals initially to tick them off your list, then work towards longer-term ambitions.

These long-term goals are more likely to include safety net goals or plans for future financial stability. It might be a good idea to incorporate these into your wider plan – if you’ve not already and have the capacity to do so. For example, these could include covering your children’s education costs, building an emergency fund, and planning your inheritance.

Choosing what you want to work towards is one thing but deciding how you’ll do it is another important consideration. Depending on your personal situation and preferences, there are many different options to consider. For example:

• Cash ISAs – a tax-efficient, instant access savings account that earns interest
• Stocks and shares ISAs – an investment account that invests your money in stocks, shares and bonds
• Stocks and shares – investing your money into different companies and organisations
• Savings accounts – regularly putting money away into accounts that earn interest based on market performance
• Property – buying or selling real estate to generate profit, whether that’s renting or renovating.

CTA: Read our guide on the different ways to invest

Creating a new budget that incorporates your financial goals is important to staying on track and on top of your money. Try to treat your goals as fixed expenses, meaning that saving or investing a certain amount each month becomes a non-negotiable. 

Depending on the savings or investment method you’ve chosen, they may have certain tax considerations and limits. For example, most ISAs have an annual contribution limit, and property investments are often subject to Capital Gains tax. If you’re unsure what you might have to pay, it might be a good idea to reach out to a financial expert for advice.

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Financial goals should be flexible, which means you should regularly revisit them to ensure they’re still in line with what you want to achieve. This might include tracking your progress, whether monthly, quarterly or annually, and adapting to any changes in your personal circumstances. You can also seek financial advice, like that offered by NatWest Premier, to help keep your goals in view.

While some of your financial goals may be short-term, they should be created with long-term ambitions in mind. For example, even if one of your short-term goals is to pay off a certain loan, keep in mind the wider benefits.

Sometimes things don’t work out, but not meeting your financial goals could just be a sign that you need to review and reset them. It might be that you were a little too vague or overambitious. With this in mind, consider your personal situation and any current financial obligations and start the goal setting process again.

The 50/30/20 rule is a budgeting method that suggests how to allocate your money. For example, 50% for needs (e.g. bills and groceries), 30% for wants (e.g. disposable income), and 20% for savings and debt management. This can help you meet your goals over time whilst managing your regular outgoings.

If you’re saving with a short-term financial goal in mind, you may want to consider either a cash ISA or a high-interest easy-access savings account. Of course, what you choose will depend on your individual circumstances and whether you’re using the money as an emergency fund.

CTA: Explore our Premier savings account options