How to set investment goals and timeframes

4 min Read Published: 31 Oct 2023

Setting financial goals is the first and arguably one of the most important steps when it comes to investing and building wealth. In order to have the best chance of achieving your investment goals you need to have a good understanding of how much money you will need and by when. In this article, we provide a basic guide on how to set investment goals and importantly, how to ensure they are realistic and achievable.

Why you should set financial goals

The idea of setting goals isn't exclusive to investing, in fact, goal setting is prevalent in every aspect of our lives. Whether at school, college, work or even during some downtime at the gym, we are all used to setting ourselves goals so that we can measure our progress and share and enjoy our successes. If you are trying to lose weight it is likely that you will have a target weight in mind as well as a date that you wish to achieve it by. It could be as simple as wishing to lose 7lbs by the time you go on holiday. In this example we have a clearly defined goal and a realistic timeframe. In the next section, we explain how to take this principle further when it comes to investing, including how to set short, medium and long-term goals as well as how often they should be reviewed.

Setting short-term financial goals - 1 to 3 years

Your short-term financial goals should include the things that you would like to achieve in the next few years. If you have a partner, try and find time to sit down and picture the ideal scenario. How many holidays would you like to take each year and how much will they cost? Do you have a car and will it need replacing? If you are currently renting, perhaps you'd like to buy your first house. If you are already a homeowner, perhaps you would like to upsize. Are you hoping to have children and if you already have children, are you hoping to have more?

How are things at work? Is there an opportunity to go for promotion, take on more hours or move jobs? Do you have a side hustle or business idea? Try and get a good understanding of where you would like to be financially in the next few years and how you might achieve that. Short-term financial goals are the easiest to get down on paper and are usually the most accurate.

Example: We would like to save £7,500 by 2026. This will pay for legal costs and moving fees on our next house purchase.

Setting medium-term financial goals - 3 to 10 years

Medium-term goals are goals that are likely to take longer to achieve, perhaps somewhere between 3 and 10 years. While we've given a rough timeframe of 3 to 10 years, it is important to remember that everyone will have different financial goals so feel free to use a timeframe that suits you best. Medium-term goals require you to think a little further into the future so try and picture what your life may look like a few years down the line. Is there likely to be another house move on the horizon, perhaps to a more desirable area? If you have children, do you wish for them to be privately educated? Do you want to help fund them through university, help them buy their first house or perhaps provide a gift towards a wedding? Medium-term goals are a little trickier to predict but try and add as much detail as you can and allow yourself to dream a little.

Example: We would like to save £15,000 in a Junior ISA by the time our child reaches 18. This can go towards either a house purchase or university fees.

Setting long-term financial goals - 10+ years

Long-term financial goals are likely to take several years or even decades to achieve so you should think about your lifestyle in your later years. How long will you work for? Do you plan on taking retirement? Will you still have a mortgage? Are you likely to downsize or move area to be nearer family? Do you want to travel the world or simply take it easy? While it is difficult to plan out your later years in any detail, building your long-term financial goals can give you a basic idea of what your life may look like in the future. It doesn't need to be exact, even knowing roughly what it might cost - say to the nearest £500 per month - gives you something to work towards

Example: I would like to retire at age 65 with no mortgage and an income of £2,000 per month

Top tips when setting financial goals

Below we provide some basic tips that you should follow when setting your financial goals:

Be realistic

While everyone should be allowed to dream it is important to set realistic goals so that you stay motivated and focused as this will give you the best chance of success.

Don't obsess about tiny details

Try not to spend too much time obsessing about tiny details as it is likely that your goals will change over time.

Price your goals in today's money

Don't waste time trying and guess how much things are likely to cost in the future. Price your future goals using today's money and update the goals each year.

Regularly review your financial goals

You should review your financial goals each year to ensure you are on track to achieve them. Make sure you note down any changes to your income as well as any other significant lifestyle changes such as moving house or having children. Have you had to pay any large bills that have slowed down your progress or are you due any money, perhaps an inheritance? Reviewing your goals once a year ensures that you stay on track and means you can make the necessary changes. Above all else, reviewing your financial goals once a year can help you to refocus your efforts and get you excited about your financial future.

Don't do it alone

If you are in a relationship and share your finances try and involve your partner when setting financial goals. Working together so that you both understand the short, medium and long-term goals can help to ease any potential financial friction down the line. Additionally, working together can make it easier to stick to your financial goals as well as provide motivation if things aren't going to plan.

How to achieve your financial goals

Having set your financial goals listen to the following section of the Money to the Masses podcast which explains how you achieve your investment goals.