We all have dreams for the future, and many of those dreams require money to make them come true. Perhaps you want to buy a place you can call home, travel to Europe with your dearest friend, or start saving to send your children to college. Reaching those milestones starts with setting clear financial goals.

Define your goal clearly

A goal is the first step that sets you on a path. It should be inspirational and based on your own values and interests. What matters most to you? What are you willing to sacrifice in order to make it happen sooner? What can help you stay the course?

A realistic goal should also be:

  • Achievable. Use your income (and expected income) to set your goals for the future. Don't count on winning the lottery to achieve what you want.
  • Specific. "To get richer" is not a specific or clear goal, but "to pay for 50% of my child's tuition at a public university" is.
  • Measurable. Set a deadline for your goal, such as the age at which you want to retire, or the timeline for buying a new house.

Identify your time frame

Categorizing your objectives by short-term, medium-term, and long-term financial goals provides focus to your plan. It also helps you match your goals with the appropriate investment resources.

Short-term goals are those you hope to achieve within the next one to three years, like taking a special vacation or making a down payment on a new car. For short-term goals, you’ll choose investments with short-term maturity dates or savings vehicles that protect you from losing value. Make sure you can access your funds any time without penalties.

Consider:

  • A savings account
  • Federal Deposit Insurance Corporation (FDIC)-insured money market accounts
  • U.S. savings bonds

Medium-term goals are three to five years away. Examples of medium-term goals include a down payment on a new house or funds to renovate your home. With medium-term investments or savings, you should still make sure you have access to your funds when you need them and without a penalty.

Consider:

  • FDIC-insured Certificates of Deposit (CDs)
  • Mutual funds with low-risk ratings (but only if you’re willing to delay your goal should the markets dip)

Long-term goals are more than seven years away. Some of life’s biggest goals, including retirement, fall into this category. For your long-term goals, you can consider riskier investments, which will potentially earn you more money. As your goal nears, increase the percentage of more conservative investments to reduce risk and ensure your financial stability.

Monitor your progress

Check in frequently on your money to make sure your goals are on track. At each check-in, ask: Am I earning as much money as I expected with my investments and savings? Am I contributing enough?

How often should you do these check-ins? If you're working with an investment professional, ask them how frequently you should meet to discuss your progress, and if you can check progress at other times on your own, too. If you're investing and saving without a professional, designate times to look at your account between now and when you need to reach your goal. Review your progress on a monthly basis for short-term objectives, and quarterly and annually for longer-term goals.

Saving and investing with a goal delivers its own reward: the purchase or life change that you’ve dreamt of and worked to achieve.

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