Lesson 2

Creating a Personal Budget

Time: ~15 minutes

Financial goals give your money direction

A financial goal is something you want to achieve using money within a specific timeframe.

Without goals

Money gets spent randomly.

With goals

Every dollar has purpose.

Goals turn vague wishes into clear targets.

Three types of financial goals

Short term goals

Within 1 year

Examples:

Build emergency fund

Save for concert tickets

Buy new phone

Medium term goals

1 to 5 years

Examples:

Save for car

College expenses

Study abroad trip

Long term goals

5+ years

Examples:

Buy a home

Start a business

Retirement savings

Your financial plan should include all three types of goals.

SMART goals framework

Effective goals are SMART

This framework makes goals clear and achievable.

Specific

Be clear and detailed about what you want

Vague: Save money

Specific: Save $500 for laptop

Measurable

Use numbers so you can track progress

Example: Save $50 per month

Achievable

Set realistic goals based on your income

Don't aim to save $10,000 in a month on minimum wage

Relevant

Align goals with what truly matters to you

Choose goals that support your values and priorities

Time-bound

Set a clear deadline

Example: Save $500 by December 31st

SMART goals turn dreams into plans.

Vague vs SMART goal comparison

Vague goal

"I want to save money for college."

Problem: No specific amount

Problem: No timeline

Problem: No action plan

SMART goal

"I will save $5,000 for college by June 2027 by saving $100 per month from my part-time job."

Specific: $5,000 for college

Measurable: $100 per month

Time-bound: By June 2027

The more specific your goal, the easier it is to achieve.

Prioritizing your goals

You can't do everything at once. Ranking goals helps you focus.

Steps to prioritize:

List all your goals

Write down everything you want to achieve

Separate needs from wants

Needs come first, wants come second

Consider urgency

Time-sensitive goals move to the top

Balance short and long term

Work on both types simultaneously

Prioritization helps you allocate money where it matters most.

Example goal priority list

Build $500 emergency fund (Need)

Most urgent - protects against emergencies

Save $2,000 for community college (Need)

Time-sensitive - classes start next year

Save $800 for new laptop (Want)

Important but not urgent

Save for vacation (Want)

Lower priority - focus on needs first

Tracking your progress

Setting goals is only the first step. You need to monitor progress regularly.

Review monthly

Check how much you've saved

Adjust if needed

Change amounts or timelines

Celebrate milestones

Acknowledge progress made

Stay flexible

Life changes, goals can too

Tracking keeps you accountable and motivated.

Key vocabulary

Financial goal: Money target with a timeline

SMART: Specific, Measurable, Achievable, Relevant, Time-bound

Short term: Goals within 1 year

Long term: Goals 5+ years away

Prioritize: Rank goals by importance

Quick recap

Financial goals give money direction
Goals come in short, medium, and long term
SMART goals are clear and achievable
Prioritize needs over wants
Track progress regularly
Stay flexible and adjust as needed

Quick Check

1. What makes a goal "SMART"?

2. Which is a short term financial goal?

3. Why prioritize financial goals?

Previous Lesson

← Setting Financial Goals

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Assessing Your Financial Life →