The trouble with not having a goal is that you can spend your life running up and down the field and never score.
— Bill Copeland
Goal setting is an important skill that first time investors can develop when it comes to financial planning. A financial goal helps you focus and find the motivation on what you are working or aiming towards. A goal is defined as the end result of something a person intends to acquire, achieve, do, reach, or accomplish while financial goals are specific targets to be met through smart financial planning. Regardless of what life stage you are in, you should have some short and long term personal financial goals. Below are a few pointers when setting financial goals:
- Learn from the past.
Think about any goals or perhaps resolutions you have set in the past. Before you set new goals and put these old ones “to bed,” reflect on what worked and what didn’t—and why.
- Know Your Current Financial Situation
In order to make a financial goal, take an honest look at your entire financial situation. You can never take a journey without knowing where you are starting from, and a journey to financial comfort is no different.
- Define your goal clearly
Write down your goals in a S.M.A.R.T way. That means that they should be Specific, Measurable, Accurate, Realistic and Time-bound. The list should be detailed and the goals prioritized correctly. At the same time, it should allow for some flexibility, as you never quite know what the future will hold for you.
- Identify your time frame
In order to focus your financial goals, it is important to categorize your objectives by short-term, medium-term, and long-term achievements. It also helps you match your goals with the appropriate investment resources. Short-term goals are those you hope to achieve within the next one to three years. Medium-term goals are goals set to be achieved somewhere between a person’s short-term goals and their long-term goals. Since long-term goals can take a long time to achieve, medium-term goals help a person stay motivated.
- Find out what motivates you
Why are you coming up with these goals? The motivation should be intrinsic and not extrinsic. Extrinsic motivations are reasons that are given to you whether you like them or not, whereas intrinsic motivations are ones you have for yourself. For example, “I’m going to build up my savings because that’s what everyone says I should do” is extrinsic. “I’m going to build up my savings so that I can quit my job to become a freelancer” is intrinsic. When your motivation is intrinsic, your goals are easily achieved.
- Monitor your progress
Make frequent reviews and evaluations to ensure your goals are on track. Find ways in which you can monitor how much progress you are making towards achieving your goals. You can choose to work with a professional, with whom you can meet frequently and discuss your progress. If you are doing this on your own, purposefully designate times to look at your account between now and your periodic intervals set out in your financial goal plan. It is advisable to review your progress on a monthly basis for short-term goals, quarterly or annually for medium to longer-term goals.