Setting financial goals is a crucial step towards achieving financial stability, security, and ultimately, freedom. Whether you’re aiming to leave a legacy for the next generation or buying a dream home, setting financial goals are essential for achieving what matters most to you.
Understanding how to set goals is the first step to creating a financial plan that works for you and having well-defined financial goals can provide direction and motivation to manage your money wisely. Why is this so?
Because financial goals serve as a roadmap to guide your financial decisions and actions. They provide clarity about what you want to accomplish with your money and help prioritise your spending and saving efforts.
Without clear goals, it’s easy to drift aimlessly, making it challenging to build wealth or achieve financial independence.
Are There Types of Goals?
Definitely! Financial goals can be broadly categorised into short-term, medium-term, and long-term goals. Short-term goals typically span one year or less and may include building an emergency fund, paying off debt, or saving for a vacation.
Medium-term goals, ranging from one to five years, could involve saving for a down payment on a home, funding higher education, or purchasing a car.
Long-term goals, extending beyond five years, often include retirement planning, saving for children’s education, or achieving financial independence.
So, when setting financial goals, it’s important to reflect on your intentions and aspirations, which can help you establish—and achieve—them with confidence.
What Type of Goal Fits my Plan?
Start by asking yourself what you want to save up for. Is it retirement, building or buying a dream home, children education or financial freedom? (consider long term goal), buying that dream ride or gadget, saving for a second or third degree or a vacation to the Maldive? (consider a medium term goal).
Whatever it may be that you are saving for, create a workable goal that can easily be achieved. Consider working through these steps to set your financial goals.
Assess Your Current Financial Situation
Begin by evaluating your income, expenses, assets, and liabilities. Calculate your net worth and review your spending habits to identify areas where you can cut back or save more.
Be Specific About It
Let your goals be SMART—Specific, Measurable, Achievable, Relevant, and Time-bound. Specific goals clearly define what you want to achieve. Measurable goals have quantifiable criteria to track progress and success. Achievable goals are realistic and within your financial capacity. Relevant goals align with your values and priorities. Time-bound goals have a deadline, providing a sense of urgency and accountability.
Therefore, clearly articulate each financial goal, specifying the amount you want to save or invest, the time-frame for achieving it, and how you’ll measure progress.
List and Prioritize
Determine what matters most to you financially. The best way to do it is to create a list (A To-Do); list in order of importance the things that are highly essential for your goals, both those you are already working on and those you haven’t started yet, placing less important ones at the bottom of the list.
Also, Write down specific details about each goal, such as the timeline, the amount of money you’ll need and how much you’ve already saved. This will help you understand what it will take to achieve each goal and build a plan.
By ranking your goals based on their importance and urgency, you can easily achieve them.
Make It Obvious
It is one thing to list and prioritize your goals, it is a different ball game actualizing those goals. A good way to be sure your goals are achieved is to make it obvious. You can do this by placing your goal list where it can be easily noticed by you. This way, it serves as a reminder that you have a task to accomplish. Clear or cancel items on the list only when you have achieved them.
Create An Action Plan
Your goals cannot be achieved on their own except you establish an action plan to turn that list into a reality. Therefore, it is important to decide how much you want to go to a particular goal, and for how long?
This means that you need to have a budget and savings plan. You may also want to automate some savings by setting up automatic transfers to designated accounts.
Also, you can seek the help of a professional if you are unsure how to apportion your money for a particular goal.
Connect Each Financial Goal to a Deeper Motivation
Just as with fitness or career goals, tying your financial goals to specific motivations makes them more meaningful. As you review your goals, reflect on the purpose behind each one. What is the underlying motivation for it? Who is the goal going to benefit?
For example, a goal of funding a particular account for a long time might be tied to a larger desire to ‘Japa’ just like your relatives and friends are doing or to enable your children to gain quality education abroad and feel more secure about your family’s future.
When documenting the detail behind the goal, get into the specifics. This will assist you in understanding the ‘why’ which will eventually help you become more committed and also help you understand how the goal is associated with other goals.
Break Down Long-term Goals into Smaller Milestones
Long-term goals can seem daunting, so break them down into smaller, manageable milestones. For instance, if your long-term goal is to retire comfortably, set annual savings targets to reach your retirement nest egg.
Monitor Your Progress Regularly
Review your financial goals and progress regularly, preferably on a monthly or quarterly basis. Track your income, expenses, savings, and investment growth to ensure you’re staying on track and not losing focus.
Adjust Your Goals as Needed
Life and time are dynamic which means that life circumstances and financial priorities may change over time. Be flexible and willing to adjust your goals accordingly. If necessary, revise your goals, timelines, or strategies to reflect new priorities or challenges.
Celebrate Milestones and Stay Motivated
Acknowledge and celebrate your achievements along the way. Do it the Nigerian way— you sef don try! Whether it’s reaching a savings milestone, paying off a debt, or achieving a financial plan, celebrate your progress to stay motivated and committed to your financial goals.
The Takeaways…
- Your financial goals are both a to-do list and a long-term strategy.
- Listing, prioritising and finding the intention behind your goals makes you more accountable and increases your likelihood of success in achieving them.
- A financial plan provides a vision for working towards your goals. Revisit your goals and your plan regularly to review your priorities and chart your progress.
- “Your financial goals are an ongoing process that provide clarity and confidence for the future. You’re building a vision for the things you’re dreaming about and want to accomplish. Start the process and see the possibilities unfold.” – Sarah Darr, head of financial planning, U.S. Bank Wealth Management
In sum, setting financial goals is a fundamental step towards achieving financial success and security. By following the SMART criteria and implementing a systematic approach, you can define clear objectives, develop effective strategies, and stay focused on achieving your financial aspirations.
Don’t forget, financial goal setting is not a one-time task but an ongoing process that requires dedication, discipline, and periodic review to ensure you’re on the right path to financial well-being.
We are well aware that it takes great courage to stay committed to one’s goals, therefore we at Credlanche are always here to lend a helping hand in financial matters. For more information on investment and advice, contact us on [email protected]