Your money might have a to-do list a mile long: pay off debt, save for retirement, build an emergency fund, cover gas and groceries.... And that's before you've even gotten to what you want to do with your cash (think: vacations, dinners out, upgraded computers). With so many jobs to do, it can be hard to tell exactly which should come first.
Here's our framework for how to create, prioritize, and then tackle your financial goals.
Financial goal examples and roadmap
Saving for 1 financial goal by itself may not feel hard. The trouble is you probably never have just 1 goal competing for your money's attention. Here are some of the most important financial goals to put on your radar and how to attack them.
1. Understand your essential expenses, your take-home pay, and your interest rates
It sounds basic—just getting a grasp on the actual numbers involved in your financial situation. And yet, when was the last time you pored over your paystubs and monthly account statements? You have to know what you have coming in and going out each month before you can optimize reaching bigger financial goals.
2. Make a budget
To reach your financial goals, you'll have to make sure you're spending less than you make, and 1 of the easiest ways to do that is to make a budget. A good place to start is with the 50/15/5 framework, where you allocate 50% of your monthly take-home pay to essentials, 15% of your pre-tax income to retirement savings, and 5% of take-home pay to short-term savings or emergency savings. The rest? It's up to you—and your financial goals. Because life and finances change over time, check in on your budget regularly to make sure it's still working for you.
3. Maintain minimum insurance coverage through your employer
Insurance helps protect you from life's what-ifs. Ensuring you have enough coverage should be a high priority as you create your financial roadmap. So opt into the health, life, and disability plans available to you. These types of insurance are often easier (and cheaper) to get through employers, and while they're a crucial part of any financial plan, they're especially vital if you don't have enough emergency savings to cover the types of catastrophic events they protect against.
4. Fund eligible medical expenses with pre-tax dollars
Health savings accounts (HSAs) and flexible spending accounts (FSAs) let you pay for eligible medical expenses with pre-tax dollars, effectively raising the value of your medical dollar by whatever your current income tax rate is. Which of the 2 accounts you're eligible for depends on your health plan—only those with HSA-compatible high-deductible health plans (HDHPs) can contribute to HSAs; those in other plans and those who opt out of HSAs can contribute to FSAs. Because these accounts are such valuable tools, you may eventually want to contribute up to their max. When you're just starting out, aim to add enough money to cover your usual expenses, like doctor copays.
5. Begin building an emergency savings of $1,000 (or a month's worth of essential living expenses)
If you don't have any emergency savings yet, work on this goal next. Like insurance, it's part of the financial safety net you should prioritize building to protect yourself from life's surprises. A helpful first goal is to stash $1,000 or the equivalent of one month of essential expenses.
6. Get your 401(k) match
When you're trying to make ends meet, saving for retirement might not be a top priority. But if you have access to a workplace retirement plan—and any sort of employer match—don't miss out on an easy way to instantly increase your investment. As you get the rest of your financial house in order, you can boost how much you contribute to your 401(k).
7. Pay down credit card debt
With interest rates around 20%, credit card debt is some of the most expensive debt out there. It's roughly 4 times the going rate for federal subsidized student loans.* Make sure you're at least covering your monthly minimum payment, but work toward paying more than that every month until you've zeroed out what you owe.
8. Save for something special
Saving for certain goals can seem like eating your financial vegetables. While it's important to plan for retirement, it's also helpful to include moments of more instant gratification. Maybe you want to go on a big anniversary trip or plan a reunion. Work to find ways to include these fun goals through the various pitstops on your financial goal roadmap to reward yourself and keep up your motivation.
9. Flesh out your emergency fund
While $1,000 or a month's worth of essential expenses is a great place to start, it may not be enough to completely shield you from an unexpected turn of events, such as a layoff. That's why as soon as you can, you should work to save 3 to 6 months' worth of essential expenses. And don't forget: You should prioritize replenishing your emergency account after you've tapped it.
10. Pay down other high-interest debt
Not all debt is created equal. How you prioritize paying it off often depends on the interest rate. Fidelity recommends targeting paying off debts with interest rates of more than 6% as soon as you can. It may seem counterintuitive not to chip away at all of your debt, but money you'd spend getting ahead on lower-interest-rate debt may be better spent on investments that historically have returned more than 6% each year on average. Individual situations vary, so be sure to read our guide on whether to invest or pay off debt.
11. Maximize your tax-advantaged account contributions
Now's the time to flip your investment contributions into high gear. Aim to put the most you can into the tax-advantaged accounts you have access to. That includes everything from your HSA to your workplace retirement plan to your individual retirement accounts (IRAs). These accounts can help give your investments an extra leg up by avoiding paying taxes on either what you put into them or what you take out—or, in the case of an HSA used for eligible medical expenses, both.
Tips for hitting your financial goals
Whether you've got a financial goal you hope to meet tomorrow or in 40 years, keep these tips in mind to up your chances of being successful.
Set specific, attainable, quantifiable goals
Make sure you can clearly articulate how much you need to save for each of your goals, as well as the path you'll take to get there. Consider the difference between "save for a down payment" and "I'd like to have $24,000 for a down payment in 4 years, so I'll save $500 a month." With the second, you know exactly what it's going to take to get from point A to your new home.
Consider separate accounts for each goal
This approach is known as "bucketing," and it helps you keep a clear tally of how much you've saved toward each goal. Not only does this keep you from having to figure out what part of your slush fund is earmarked for what, but it also may motivate you to save more. Think about the jolt of dopamine you'll get each time you deposit more cash into your wedding or vacation fund.
Pick the right account types
There's no 1-size-fits-all account when it comes to financial goals. You'll want a range to meet your goals efficiently. For short-term goals, you want your money to be safe and “liquid,” or easily accessible as cash. That's when you'll probably want something like a money market account or a high-interest savings account that assures you'll have your money when you need it. For retirement savings goals, though, you'll likely prefer to position yourself for greater potential returns—and oftentimes that means putting your money in the stock market. That's where retirement accounts, like the 401(k) you have at work or an individual retirement account (IRA), come in handy.
Automate contributions whenever you can
Nobody wants the headache of having to ferry their cash between their various accounts. Instead, set up automatic contributions from your paycheck or recurring transfers from a main checking account to other goal-based accounts. The less you have to think about, the easier it is to save.