Goals aren’t just dreams — they’re your roadmap to financial peace of mind. Whether you’re planning a big purchase, a trip, or something longer-term like buying a home, defining clear financial goals will make your money work smarter, not harder. Here’s how to do it, step by step:
Why set financial goals?
Setting clear goals helps you focus your saving, prevents unnecessary spending, and motivates you to stay on track. Think of it like using a satnav: knowing your destination helps you find the best route there.
What are your goals?
Start by jotting down your plans, big or small. Not sure what counts as a financial goal? Here are some common examples:
- Going on holiday
- Buying a home
- Purchasing a car
- Home improvements
- Paying off your mortgage early
- Saving for a wedding
- Starting a family
- Funding further education
- Building a retirement pot
Don’t stress if your goals feel vague at first. Write them down anyway; clarity often comes later.
Work out how much you’ll need
Once you’ve listed your goals, estimate how much money you’ll need and when. Don’t worry if it’s not exact — rough numbers will do.
For instance:
Holiday in Spain: £1,500 in 12 months
New laptop: £800 within 6 months
House deposit: £25,000 in 5 years
If you’re unsure, pick an approximate target like “home deposit around £20,000” or “£15,000 to refurbish the kitchen in about two years.”
Calculate your monthly savings
Now, divide each goal’s amount by the number of months you’ve got to achieve it:
- £1,500 holiday / 12 months = £125 per month
- £1,000 laptop / 6 months = £167 per month
- £20,000 house deposit / 36 months = £556 per month
Doing this makes it easier to fit these goals into your monthly budget.
Adjust your goals to your budget
If the total of all your goals exceeds what you can comfortably afford to save each month, don’t panic. Adjust the timelines or amounts until it fits. Perhaps your dream holiday becomes a long weekend away, or the new car is a slightly older model.
Should you save or invest?
For goals within five years, a regular savings account is usually safest. Your money won’t earn huge returns, but it won’t lose value either.
For longer-term goals (five years or more), investing could give you better returns. You might consider investing for:
- Retirement planning
- Buying a home (if more than five years away)
- University fees for your kids
| Goal timeframe | Recommended approach | Why? |
|---|---|---|
| Short-term (0-2 years) | Savings account, Cash ISA | Keeps your money safe and accessible |
| Medium-term (2-5 years) | Fixed-rate bonds, Premium Bonds | Slightly better returns with moderate security |
| Long-term (5+ years) | Stocks & Shares ISA, Pension | Potential for higher growth over longer periods |
If you’re planning to buy your first home, a Lifetime ISA (LISA) can be particularly helpful, offering a government bonus of up to £1,000 a year.
No goals? No worries
If you’re just saving without a specific target, that’s perfectly fine. But even then, having a vague idea can help — like knowing you’re saving for future flexibility, early retirement, or just peace of mind.