A goal is something that you would like to accomplish; it's a target or something at which you can aim. Goals point the way for the direction you need to take. Think back to the mall directory example in the last topic. Your personal net worth indicates your current location, like the star on the mall map and your goals will show you the way to reach your personal wealth. If you are trying to get to a particular store in the mall, you start at the star and track the shortest path to the desired store. Goals also show you the way to your destination and learning to set clear financial goals is crucial for your success in life. How do you do this?

Short-Term vs. Long-Term Goals

The first step in establishing financial goals is to understand the two different types of goals: short‐term and long-term. The activity below outlines both types of goals.

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Setting financial goals can be overwhelming, especially setting long‐term goals. By breaking long‐term goals into smaller short‐term goals, it makes accomplishing your long‐term goals easier and less intimidating.

Setting Financial Goals

Now that you have a better understanding of the different types of financial goals, let’s take a look at the steps you should take to set and achieve clear financial goals.

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Final Tips for Goal Setting

Resources, especially money, are limited, so you have to choose what to buy and stick to your plan. Many decisions involve trade-offs. Earlier in the course you learned about opportunity costs, which are the things you give up to get what you want. This involves deciding what is most important to you. You also learned about needs and wants. Recall that needs are necessary for survival, and wants are things you would like to have but could live without. Needs-based goals take precedence over wants-based goals.

With longer-term goals, you often have to give up something you want now in order to get something you want in the future. Short-term spending can really throw your progress off track. Therefore, you may have to deny yourself a short-term want in order to meet a long-term goal.