There’s no question: Financial security comes directly from planning and saving. You can’t spend your life throwing money about willy-nilly and expect to have it all work out in the end. You have to plan. In order to prepare, you need to get a comprehensive overview of where you are, where you want to be, and the path to your goals.

There are plenty of time horizons to set to achieve your goals, but what’s the best way to move toward them? How do you know whether you have succeeded at reaching your goals or missed them? How often should you reevaluate your finances to ensure that they match your family’s needs and your life as it unfolds?

The Importance of Setting Financial Goals

Without goals, we can’t evaluate where we are, where we came from, and where we want to be. Financial goals are no different. Without a measurement or evaluation tool to figure out where we stand, we are more likely to overspend and under-save, potentially putting our families and ourselves at tremendous financial risk. The first step in any preparation for the future is to set short-, medium-, and long-term goals based on where you are in your life and what you want to use your money to achieve.

How to Set Short-Term Financial Goals

Setting a budget is the first step in starting to set your financial goals. Without one, you can’t get a real handle on the regular inflow and outflow of your cash. Begin with short-term goals. A few examples of reasonable short-term goals to set include saving for an emergency and creating (and sticking with) a budget.

Setting a budget for your weekly, monthly, and yearly outlays is an excellent way to get started on short-term goals. It takes time to build up a cash cushion. Most people don’t become rich overnight, so you need to give yourself some time to build up the cash coffers you’d like to see. 

Short-term goals can start as small as saving just $5 per week. If you save $5 per week, you could have nearly $300 saved by the end of the year (not accounting for compounding interest if you put that money in a savings account). While that might not seem like much, it’s a good start, and it can get you into the habit of saving money on a regular basis. 

How to Set Medium-Term Financial Goals

Medium-term goals are a bit further out on your timeline. Good examples of medium-term goals include paying off student loan debt and any significant credit card debt you may have. While experts disagree on whether you should prioritize paying off your credit cards or saving for a rainy day, it makes sense to reduce your debt load as much as possible in both the short and medium terms. Knocking out debt makes it far easier to save since you’ll have cash to put toward your goals, rather than spending it paying down anything you owe.

Mid-term goals are designed to create a bridge or path to your long-term goals. By knocking out some of the more low-hanging fruit, you can start to focus on the bigger things that you want to achieve with the money you have. Your mid-term goals can include things like starting to save for a house, a new child, or a big purchase you’d like to make in the future. Remember, these are just the mid-point goals you should be setting, so be sure they align with the reality of what things cost and what you might need to spend. 

As an example, having and raising children is exorbitantly expensive. In fact, according to  Investopedia, it can cost nearly $300,000 per child (excluding the cost of college). That’s a tremendous amount of money to save, and it takes planning and work to get there. If you and your partner are considering having children, it pays to start saving now so that you can afford your children’s care well into the future. 

How to Set Long-Term Financial Goals 

Once you’ve set up your mid-term goals, it’s time to think about your long-term goals. Long-term goals include things like saving for retirement and large purchases like a home. There are plenty of retirement calculators out there that can help you decide how much money you might need to retire and how much money you can live on each year. A good basic breakdown of how to estimate your retirement needs is over at The Balance, here

Once you know how much you need or want to retire on or how much it will cost to buy your dream home, you can then readjust your monetary goals for your mid-term and short-term budgets. Any money you can save for the future will be cash you’ll be happy to have down the road.

If you’d like to know more about how to set a weekly, monthly, and yearly budget, check out the piece I recently wrote on the topic here

Regularly Reevaluate Your Financial Goals

As we age, our financial goals can and do change. Your goal setting and financial planning should be, at a minimum, an annual event. Don’t think of this process as a set-it-and-forget-it exercise, but rather one that you should regularly revisit to make sure your money is doing everything it can for you and to reevaluate your goals.

By continually evaluating your goals as you get older, as your family changes, and as you begin to move toward retirement, you’ll gain the flexibility that you need to keep your financial plan relevant.

Consider this: The current pandemic has rocked a wide variety of sectors of our economy, including travel, restaurants, healthcare, and others. It has completely changed the way we all work, communicate, and connect, and experts believe that the societal and business effects of COVID-19 will likely continue for years to come. In fact, the Brookings Institute recently predicted that the pandemic will have a wide-reaching impact on many familiar parts of our economy, including housing, technology, food and retail, and healthcare. If you’re employed in any of these sectors, you’ve likely felt the impact of COVID-19 more 

acutely. The changes that COVID has wrought might mean that you need to change your career, rethink your savings, and perhaps stash a bit more cash for the future. Without regular financial reevaluation, you won’t be able to adapt to these changes and ensure your future financial safety and security.

Additionally, it’s important to remember the adage that nothing ever stays the same. Today, you should never assume that what you are currently doing professionally is going to be what you will be doing in 10 years. You should also never expect that the money you are earning now will be the same in the future.

The world is continually changing and evolving, as are our needs, wants, and goals. You could lose your job tomorrow, suffer a family loss, or need to step back from work to take care of a sick loved one. You could even be fired. Taking a few hours once or twice a year to check back in with your finances will help you be more secure in the face of these uncertainties. It will also help you adapt to any outside influences that can and do change your income at any time. Without regular check-ins, all of your planning will go to waste.

Remember: Money Is NOT Good or Bad—It’s a Tool

One thing to remember is that money is a tool. It’s not good or evil, but it’s merely a tool we all use to get what we want and need when we want and need it. 

Many people’s relationship with money is fraught. The idea of budgeting often conjures up images of what you can’t have and carries a negative connotation of restriction, limits, and saying no. While those are elements of this exercise, they aren’t the entire nature of it. Money is used to empower you to do the things you want, when you want, and do them within the means that you have. Changing the way you think about money is key to building a secure financial future, and it’s the talk of top personal finance experts like Suze Orman and Jen Sincero. Both offer great suggestions for how to get out of debt and how to change your mindset from scarcity to abundance.

While we may tend to assign money an emotional value and feel positive, negative, frustrated, or angry about it, money is, at its core, just an object we use to move closer to our goals. Reframing thoughts about money takes time and work, but if you can come to see it as a neutral instrument to help you get closer to your goals, you will likely improve your relationship with it and change the way it flows to you. You can also significantly impact how you prepare for both your future and that of your family.