How To Set Financial Goals
Happy new year everyone! Normally this is the point of saying ‘new year, new me’ or ‘2019 is my year’. Nothing wrong with that so long as you’re making deliberate efforts towards that ‘new’ you. Now back to business. Talking about finances that is. Typically December/January is a time of reflection for most people.
How well was last year?
Did you have goals and how far did you go?
I assume you’re reading this because you want to be intentional with your finances and a good way to start is by setting a financial goal for yourself. It’s a new year anyway so why not?
A financial goal is simply a target set in monetary (money) terms and that covers a lot of things usually with a future need in mind.
Examples of financial goals include sticking to a budget, increasing savings by a certain percentage, saving up for a vacation, diversifying investments, starting a retirement fund or even debt setting. Financial goals differ from individual to individual so be sure to look inward and set realistic goals for yourself.
How to set financial goals
The aim of setting financial goals is to give you a certain control over your finances. You can decide to tackle multiple areas at once or just focus one a major one.
It all works out fine in the end so far it’s not a one step forward 2 steps back kind of scenario for example, saving for a holiday and at the end of the day you get your ‘savings’ by borrowing…don’t do that! Okay, the first step is knowing what exactly you want or need. Stop, think, reflect.
This will determine your focus point e.g. a student can’t have the same goal focus as a couple planning for a wedding or a baby and a person in his/her 30’s will definitely have different goals from a person approaching the 50’s.
Write down all your goals in order of importance and attach a certain time frame to it. This now splits your goals into short and long term. Remember goals should be Specific, Measurable, Attainable, Relevant, and Time-based.
Now it’s time to set action plans. How do you intend to achieve goal ABC? Well since this is a financial goal, the drawing board is your budget. How much do you have to set aside to achieve goal ABC in record time? In the beginning I stated that when setting financial goals, you need to look inward to draft a plan. You can’t expect to set a goal of 500,000 as savings by December 2019 when you have a salary of 50,000 monthly and no other source of income. That’s being unrealistic and you’re setting yourself up for failure if you fail to get other income sources. So remember, set SMART goals.
Review, review, review! Don’t just set the goal and leave it. From time to time depending on the goal time frame to a review on how far you’ve gone. Doing this helps you to identify once you’ve fallen off quickly and how to get back on track. Have measurable targets for each period so you’re not going on a wild-goose chase. I advise keeping a journal. You’d be surprised to see just how far you’ve grown over time.
Lastly, reward yourself for a job well done. When all checks have been put into place you’re free to give yourself a pat on the back. It’s not easy to be disciplined while growing finances but be sure you don’t go overboard with your reward. It shouldn’t put you below the pre-existing benchmark.
Wishing you a successful 2019!