How to set financial goals, achieve them

26 Jan, 2020 - 00:01 0 Views

The Sunday Mail

Life works better when you set goals — goals that encapsulate your core values and your ambitions.

Setting goals gives life meaning and purpose and achieving those goals can lead to all sorts of things, like happiness in retirement and passing on a legacy to the next generation.

But setting goals and achieving them is much easier said than done. Many of us have a vague idea about where we want our finances to be in the future, but for some reason we never manage to get there.

Here are five tips to help.

Decide why your goal matters

There is no point in setting a goal if it is not relevant. You need to ask yourself why you are putting yourself in this position. For example, the purpose of investing for retirement is for security and financial independence, which will allow you to enjoy your golden years and spend quality time with your children. Similarly, the purpose of keeping an emergency fund topped up is to alleviate stress in a crisis. If you clearly define the purpose of your goal, you will have a better chance of committing to achieving it.

Make sure your goals are aligned

Most goals can be split up into three categories — short, medium and long term. List your goals in each category, then make sure they are aligned. For instance, you might have a medium-term goal of travelling overseas every year. However, if this jeopardises your long-term goal of financial independence in retirement, you will have to review how many times you can afford to travel.

Put pen to paper

The physical act of writing down your goals and describing them in detail can be incredibly powerful. It has been shown that people who record their goals are 50 percent more likely to achieve them. When you write things down, you store that information externally and clear your mind; your goals are not affected by the whims of your fluctuating mood. Type out your goals, print the page and put it on the fridge, or set it as your laptop screen saver. Even better, get a sturdy journal and use an old-fashioned pen. There is another benefit to writing down your goals — it has been proven time and again that the process encodes what gets stored in your long-term memory. When you write something down, you have a far greater chance of remembering that information. And if you remember, you will act.

Embrace the system

Just as writing down your goals clears space on your mental to-do list, so does establishing a systems-based approach to achieving them. Both practices effectively remove emotion from your decision-making and give you a greater chance of reaching your targets.

A great example of a system is to establish debit orders towards various funds, such as a holiday fund and an education fund. To make your system more robust, consider instructing your investment manager to automatically increase your debit order by 5 percent or 10 percent annually.

Other examples of good systems — pay off your credit card in full every month, without question; and invest at least 50 percent of your 13th cheque towards your retirement.

Use a budget as a road map

Budgeting and reconciling the amounts spent at the end of each month is one of the most powerful tools to ensure that you reach your financial goals. The process gives you a clear picture of what’s actually happening in your life, and what you need to change so that you can meet your objectives. Budgeting does not mean you need to stop enjoying life, it just ensures that you will enjoy the things that matter most to you.

Another significant benefit of a budget is that it enables you to communicate with your family about how to use money for the benefit of everyone. It promotes teamwork, working towards common financial goals, and it prevents conflict about how money is spent.

Most importantly, a budget teaches family members about accountability, and about how to spend responsibly.

Happy new year!

It is that time of the year again, when we are pressured into creating a stack of new year’s resolutions. Instead of pretending to yourself (again) that you will embrace the latest dieting fad, set yourself some real goals, each with a clearly defined purpose. Then make sure your goals are aligned with each other, set up the right systems and start budgeting. In the words of Will Robinson, “Financial fitness is not a pipe dream or a state of mind. It is a reality if you are willing to pursue it and embrace it.” — IOL Personal Finance

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