University of Idaho Extension

Setting Financial Goals

Money target graphic

what are your financial goals?

Before spending money on a goal, think about how important it is and whether it's a want or a need.

Setting a financial goal is the first step to achieving your financial objectives and creating a sustainable spending plan. Let’s say you’ve planned a beautiful vacation. You’ve reserved the hotel room, had the car serviced for the trip, put the mail on hold, and packed your bags. You get into the car and pull out of the driveway, but where are you going? How do you get there? Where is the map?

Goal setting is your map to reaching your financial dreams. Where do you want to go? What is your vision for the future? What would you do with your money if you didn’t have bills to pay or debt to extinguish? Dreaming is a big part of goal setting. Let your imagination go wild: what would you like your financial future to look like?

Write your dream(s) down and put the note where you will see it every day. That will remind you of your dream and help you achieve your goal. Without a direction, dreams/goals just stay parked in your driveway.

wants & needs

Is this a want or a need?Next, is your goal a want or a need? We all have wants and needs, and they vary from person to person—even in your own family.

Wants are those things that would make life a little more fun and comfortable. Needs are those expenses that are necessary for daily life, like food, shelter, clothing, health care, and transportation. Our wants and needs are formed by our experiences, our values, and our beliefs. What you think is important may not be as important to the next guy or gal.

Before spending money on a goal, think about how important it is and whether it’s a want or a need. Ask yourself:

  • Why do I want this?
  • Do I really need this?
  • What is most important right now?

For help with determining your wants and needs, try this activity from the National Endowment for Financial Education’s High School Financial Planning Program.


Whatever your goal is, your next step is to define the length of time it will take to achieve it and when you need it. Some financial goals and dreams can be fulfilled in a matter of days; others take a bit longer:

  • Short-term goals are goals that can be achieved in less than three months.
  • Intermediate-term goals are goals that usually take three to six months—but can take up to 12 months—to accomplish.
  • Long-term goals are goals that take more than a year to realize.

A short-term goal can be a Friday night pizza or a weekend get-away. An intermediate-term goal might be buying a new television set, whereas a long-term goal might be saving for a car, a child’s college education, or retirement.

Some goals take more resources and a little more planning. For information on specific goals and examples, like retiring or buying a house or car, see Savings.


Once you’ve determined if your goal is a want or a need and how long you have to work towards it, it’s time to decide if it’s a SMART goal. Having a SMART goal will help you plan your financial goal’s direction, maintain the dream as you work towards it, and reach it when you expect to.

SMART stands for Specific, Measurable, Attainable, Realistic, and Timeline.  For more detailed information on SMART goal setting and forms to create your own goals page, visit

Are your goals SMART?

  • Do you know exactly what you want or need? Can you distinctively define it?
  • Do you know how much it will cost? How about the costs associated with having it?
  • Is it affordable and something that you can work towards?
  • Is it a reasonable purchase that will fit easily into your life?
  • Can you realistically save for it in the time you’ve allowed?

If you answered yes to all five of these questions, you have a SMART goal.


What if you find that after all of your planning and goal setting, your dream isn’t attainable as is? Does that mean you scrap the whole dream and move on to the next item on the list? Maybe! But there might also be another solution for you: consider “stepping down” your dream.

The Step-Down Principle*, developed by Prof. Alena Johnson of Utah State University, allows you to achieve a version of your dream.  It may not be the exact goal you had in mind, but it will get you to the same destination. Here’s how it works:

The Step-Down Principle

*For more information on this principle, go to

What if you really wanted pancakes for breakfast? Funds were tight, but you wanted to take your friend to a local restaurant, where you would easily spend $18.10, plus tip, for two. Instead of going to that “fancy” restaurant, what if you “stepped-down” your meal and stopped at a fast food restaurant? You would still get your pancakes, but you wouldn’t have to pay the “fancy” restaurant price or the tip. Taking it further, maybe frozen pancakes and bottled juice would satisfy your goal at $5.50—or a pancake mix ($2.20) or making the pancakes from scratch ($1.15). You still get your pancakes; you just compromise on where and how you get them.

The “Step-Down Principle” works for many goals, big or small. Consider it whenever you’re having difficulty meeting all of your goals. For example, if you’ve been dreaming of the BIG family vacation to Disneyland, including airfare, hotel, park passes, food, and transportation for seven days, you’re looking at $4,010.50. However, if you “stepped-down” the vacation to three days instead of seven, you would still be able to enjoy family time at the park for $3,019. You might even take this a step further and consider a vacation closer to home: seven days at a regional amusement park, including hotel, food, park passes, and transportation in your own vehicle for $1,448. That gets you the rides, but without the cost. If that’s still a little more than you can afford, take it down another notch: buy an inexpensive tent, sleeping bags, cooler, and yummy foods, toss in some inner tubes, and camp along a nearby river for under $500.

Once you have your SMART goal in mind, it’s time to find the money to pay for it. See  Tracking Expenses for ideas on finding the funds to make your dream a reality.

Developed by:

Karen Richel
University of Idaho Extension Educator
P.O Box 8068
Moscow, ID 83843
(208) 883-2267

Marilyn C. Bischoff
University of Idaho Extension Professor and Family Economics Specialist
322 E. Front St., Ste. 180
Boise, ID 83702
(208) 364-9910

2014 Update by:

Nancy M. Porter, Ph.D.
Extension Personal and Family Finance Consultant
University of Idaho
(864) 650-8289

Other credits:

Educational Communications,
University of Idaho College of Agricultural and Life Sciences:
Editing: Marlene Fritz, Communications Specialist, Boise
Web Design: Jacob Peterson, Web Designer, Moscow

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