Financial Goals - How do we set them? (3/3)
image by Chiara Bonetto
With the what and why done, the next step is the how do we set financial goals.
If you haven’t read part 1 & 2 of this blog series, see links below:
Okay, so how exactly do we set financial goals, these 6 handy steps will help:
Prioritise
Figure out what your priorities are and write them down. PS paper works best and do it away from your phone and PC. I like to start with the long term goals first (think 10-15 years), I then look to break these down into 2-5 year goals. After that these 2-5 year goals are broken down to <2 year goals.
Once you have this list of short term goals, define at least 3 task to complete for each goal (<2 years) and make sure you complete 1 task for each within one month.
Categorise
Categorise your goals into short, mid and long-term goals. Also consider using a high, medium or low priority or 1/2/3, with 1 being the most important. Just remember to keep it simple.
S.M.A.R.T
Apply a SMART goal strategy. In other words, ensure they are specific, measurable, agreed, realistic, and time bound - see part 1 of this blog series for more on SMART (here if you missed it).
Budget
Create a realistic budget. Understanding what’s coming in and what’s going out, then work it to address your goals. Use your budget to plug leaks in your personal finances.
Automate
This is a key step to achieving your goals, make sure that you allocated to your goals automatically. Directed payments into a separate account/s (such as saving or investment account) or (debt or mortgage payments) via standing order or direct debits to address the first priorities in your list of goals.
Monitor
Review your progress regularly to ensure you are hitting your milestones and benchmarks. If you don’t hit your targets, take some time to re-evaluate what went wrong and how to improve.
In summary, defining your goals drives you to take action so your chances of achieving them increases. Once you’ve charted your course to achieve them, you set yourself in motion toward a successful outcome.
For the observant out there, you will have noticed the subtle change in blog image from the first part to the last part in this blog series. This is how I like to think of goals. When you start, you only know so much about the journey (i.e. what you see and know to be true will change). The further you go, the more you learn and the closer you get to your ultimate goal (in the 2nd image you will have to navigate around the boat ahead, you did not know this when you started - image 1). In addition to this, if you need to get to a certain destination, just starting will get you there much sooner (over planning and over thinking keeps you from starting). Once you are out at sea, you can correct course. Do you really want to be the one that never leaves the harbour? Just like in the 3rd image - once out at sea, the destination will become clearer and you will see all the obstacles … Just START!
This blog series is dedicated to “das fibonator”
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