So now that you understand what is going on with your money, we now need to figure out how that whole exercise fits in with your financial goals. If you haven’t read my last post on the 5 essential steps you need to take in order to manage your money better, go check it out or click here),
1. What are financial goals?
Simpy put, they are targets that you set yourself because of your future financial needs. Financial goal are so important because they actually affect your day to day. How? Because it influences the decisions that you make in your daily lives, for example, if your goal is to save up for a holiday, then you may need to cut back on ordering take out on Wednesdays and Fridays in order to save up for the holiday.
Some financial goals you might have set yourself are:
- Going on vacation
- Buying a house
- Paying off debt
- Building an emergency fund
- Buying a car
- Saving for a wedding
Whatever they are, just know that it will be easier to reach your financial goals if you know exactly what they are beforehand.
2. How to determine what your financial goals are
Ok, now this can go either way, you can either feel like you have no idea where to start or you can feel like you have way too much. So how do we strike the balance? Well, lets start with you.
a) Think about what matters to you, what inspires you, what you want to achieve down the line. Write it all down and don’t worry at this stage if it seems unattainable or if you think you are writing too much, put it all down on paper. We will go through the sifting exercise later (lol)
b) Now that we have the list, you now need to determine what strategy each goal falls into, i.e. short term (between 6 – 12 months), intermediate (between 1 – 3 years) or long term (3 years+) . Don’t worry if you move things about a few times because as you start the exercise, you will start to pin point what strategy works for you.
(i) a short term goal could be saving up for a vacation
(ii) an intermediate goal could be paying off a specific debt
(iii) a long term goal could be buying a house
Additionally, don’t worry if you find your goals changing overtime because as you grow and as your circumstances change, so should your financial goals. Just remember to apply the same approach I talk about in this post.
c) After classing your goals into the different strategies, we now need plan how we work towards achieving them. We do this by thinking S.M.A.R.T. This part is very important because it helps you from feeling frustrated during the process when you don’t feel like you are achieving your goals because you have set them too high to the point where they don’t seem achievable.
- Specific – You need to be simple and clear, avoid being ambiguous
- Measurable – You need to be able to measure your progress so you can judge when a goal will be met
- Achievable – You may struggle to achieve a goal if it is too ambitious. (note here I didn’t say impossible just that it shouldn’t be too ambitious lol)
- Realistic – You need to think about the resources and time available to you in order to achieve that financial goal
- Timely -You need to set a time frame to help keep you focused on your goal
Let’s bring it all of that together
Financial goal – Buy a house
Time strategy – Long term
SMART Goal: Save £12,000.00 over the next 4 years for a deposit.
Financial goal – Buy a car
Time strategy – Short term
SMART Goal: Save £1,500.00 over the next 12 months to buy the car.
3. It’s not all doom and gloom
As important as it is to set goals, it is also as important to reward yourself when making progress and achieving your goals. This might include purchasing an outfit you want, or going to that restaurant you really wanted to go to. Rewarding yourself allows you to stay motivated because you are in this for the long haul, so you need to find ways to enjoy yourself through your financial journey.
Remember, the process is just as important as achieving the goals themselves because you find yourself establishing good habits, which will ultimately lead to your financial success.
The last thing I will add is be ACCOUNTABLE to someone with your goals, set specific dates to check-in with each other and review your plan. It helps to keep you motivated and focused on your goals.
So if you are ready to make strides towards achieving your financial goals, help is at hand because I have designed the Financial Goals Workbook to get you started.
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