I imagine you’re at least curious about managing your money better considering you’re visiting this website. A good place to start is setting financial goals.
Errr, what is that?
A financial goal is a monetary target centred around how you save, spend, earn or invest money. People have all kinds of financial goals. You have probably set one for yourself in the past if you answer yes to any of the questions below:
• Have you ever saved up for a particular thing before? e.g rent, car, game console, new clothes, etc
• Have you ever set aside some money in the case of an emergency?
• Have you ever created a personal budget?
• Have you ever said to yourself, “I need to make x amount of money in x amount of time”?
Yeah, I thought so. You’ve set a financial goal in the past.
But setting goals aren’t enough, you need to achieve them. What if I told you that the way you set goals can hinder you from achieving them? Seems ironic, doesn’t it? Well, it’s true.
Failing to set financial goals, setting financial goals in your mind and setting vague goals are ways people unknowingly stifle their financial progress.
Edwin Locke, the pioneer of research into goal setting realized that individuals with highly ambitious goals out-performed those without. There’s something about setting highly ambitious goals that can improve your chances of achieving them.
In light of this, George Doran coined the S-M-A-R-T acronym for goal setting.
• S for Specific. Specific financial goals address a particular want and need. Each goal should have a want or need at its core.
• M for Measurable. Design your financial goals to be quantifiable. This will greatly improve your ability to monitor your progress closely.
• A for Attainable. Set financial goals that you know you can achieve with a bit of drive and commitment. Set goals that are custom-fit for you. There no need to copy and paste someone else’s goals. It won’t work because you aren’t faced with the same circumstances.
• R for Realistic. Set financial goals that are practical. Practical goals can be implemented in this life. Saving 100% of your income to buy a game console is not realistic.
• T for Time-bound. Always set financial goals to be achieved within a specified time frame- a week, a month, a year etc. It prevents you from procrastinating till eternity. Once you’ve achieved one goal, you can go on to set more goals and achieve them.
So let’s make it practical…
What your current goal looks like
Still in your head, unwritten
Not very clear yet but you’re hoping it will become clearer over time
Sounds a bit like “make more money this year”, “start a business”, “go on vacation”, “save up N1 million” etc.
What your goal should look like
I want to open an online clothing store in a month that will make N4,008,000 in revenue and 20% profit within 12 months of operation, with an average of N334000 in revenue every month.
I plan to save N120,000 for a new laptop by saving N15,000 from my N100,000 salary each month for 8 months.
I plan to save N500,000 for a vacation in xxx place for a week. I will need to save N50,000 each month from my N270,000 salary over 10 months.
I want to build an emergency fund of N500,000 in case unforeseen circumstances arise or to fund my living expenses if I lose my job. For the next 12 months, I will save N41,700 out of my N350,000 salary
“Setting goals is the first step from turning the invisible to visible”
Now let’s address other things that can help you achieve your financial goals.
1. Writing it down: Write your plans down in your financial journal so you can always refer to it regularly. Research says that people who have vague, unwritten goals are 10 times more successful than people without goals. People with clearly written-down goals are 30 times more successful than people without goals. Having goals puts you ahead and having clearly articulated goals puts you even further ahead.
2. Align your goals with your values: The easiest way to abandon your financial goals is to set goals you couldn’t care less about. However, when you set goals you care about, at the very least two things will happen. One, you will feel motivated to achieve them. Two, you will benefit from achieving them.
3. Review: Review your goals regularly to see how you’re measuring up. Are you on track? Have you deviated from the original plan? Deviation from the original plan isn’t always a bad thing. Maybe your original goal has morphed into something else that is equally worth pursuing. Maybe your priorities have changed. All of this will come to light when you review your goals.
4. Practice Accountability: Have an accountability partner. This is as simple as having a good friend check on you. We tend to perform better when someone is watching over us.
5. Reward yourself: Once you’ve achieved that goal you worked so hard for please reward yourself. Celebrate your diligence and sacrifice. Rewards give you something to look forward to and affirm that you’ve done a good job.
Culled from Finance with Sola