Setting financial goals

It has been three months since you made your New Year’s resolutions. How are you faring on? If you are on track, well and good, if you aren’t, fret not. You still have nine months to go. I bet one of your resolutions was to better manage your finances this year, right? But you are still wallowing in financial glitches, just like you did last year. Well, the best way of getting out of this quagmire is to establish financial goals that will work for you. 

A financial goal is an objective that is based on money. They range from the mundane like planning a family holiday to the grand such as building a house. Setting financial goals will not only put you in charge of your money, but also your life. Let’s face it, it’s money that makes the world go round and a hitch in your pockets could mean your world coming to a stand still. Just like any other goal you set in life, your financial goals ought to be specific, realistic, time based, and flexible. If your financial goals do not reflect these vital characteristics, then you are setting up yourself for disappointment and frustration.

The first step to getting sorted is to work out where you want to be financially and what your priorities are. This means that you categorise your goals into short-term, medium-term and long-term. The short-term goals are those that can be accomplished within the next six months to one year. A good example of a short-term goal would be to put a certain amount of money in your savings account or paying off your child’s school fees. Medium-term goals are those that one can achieve within the next five years such as having enough money to buy a plot or paying off your car loan. Long-term goals are those that you project will take you more than five years to achieve like sending your children to university, building a house, saving for retirement or taking on a huge investment.

Once you have categorised your goals, the next step is to prioritise each of them, whether short-term or long-term, in order of importance. You probably can’t afford to work toward all your goals at the same time, unless you are lucky enough to come into a financial windfall. Doing so can be catastrophic as you are likely to spread yourself so thin financially that you end up not achieving any of them.

But where will the money come from?

Do not be overwhelmed by the burgeoning amount of cash that you have to save. The essential thing is to have a set of tangible financial goals to work toward. Now that you know what you want to do, and how much money it will take, it’s time to decide where you will get the money. When setting realistic financial goals, you also need a plan for getting the money you need to make it happen. There are two likely sources: cutting expenses and earning more. There is always something you can cut out from your budget. Simply follow the 30 days rule: don’t buy an item and if you can go for 30 days without needing it, then you don’t need it. Remove it from your budget so that you can free some money for your goals. Also, look for ways to earn more money. Save any windfall including this year’s bonus and direct it towards your goals. You can also finance another goal through a combination of cash and credit. When saving, look for a financial institution that will guarantee you the highest interest on your savings.

For those who are married, it is absolutely fundamental that you and your significant other share the same financial goals. Otherwise, it would be a plan in futility. Develop your financial goals together and review the steps made as a couple to ensure that both of you are contributing to the same goals.

The key is to formulate financial goals that work for you and this requires planning. Write down what you want to achieve and then plan on how to achieve them – the earlier, the better. It is imperative to review your progress on a monthly or quarterly basis and on a specific date. Celebrate when you achieve a goal and then set yourself a new one.