The New Year is a great time for us to re-evaluate our lives and set goals to improve in areas we want to grow in. I hope one of your top goals for 2020, like me, is to get your financial house in order and make your dreams come true.
You have the ability to turn your dreams into reality and get whatever you want in life. All you need to do is to create powerful goals to make it them happen.
Successful people have written goals.
By creating and writing down your goals, you are giving yourself the permission to make it happen and choose the lifestyle you want to live. If we go a step further, sharing goals with others enlist their support and even increases the chance of our goals happening faster.
One word of warning – be clear on your goals! Nothing can stand between you and your goals if they are clear and actionable.
Why? If you are focused and take action, you will not only achieve those goals and sometimes exceed them.
When we set goals, we should really consider all areas of our life. For a well-balanced life, we should set goals in the following areas:
- Fun and creation
- Personal development
Types of Financial Goals
Financial goals can be grouped in 3 categories depending on how long it takes to achieve them as follows:
Short-term goal – these are goals you can achieve in less than one year such as
- Saving an emergency fund
- Paying off a credit card debt
- Saving for a vacation.
Medium-term goals are goals you can achieve in within 1 to 5 years such as
- Saving down payment for house.
- Buying a car
- Pay off debts
Long-term goals are goals which take more than 5 years to achieve such as
- Saving for retirement
- Saving for your children’s education.
- Paying off mortgage
How to Set Financial Goals SMARTER
Ensure your goal follows the SMART principle to turn them into reality:
S – Specific
Describe What you want to achieve in clear and specific terms. For example, if you are saving for a down payment for a house, it is much easier to keep to your saving plan when you have a clear description of the type house you want.
Or if you are looking to increase your income, you need to know what you want. For example, “I will increase my income by 30% compared to last year”. Be specific about your goal as possible.
M – Measurable
You must be able to quantify your goal so you know when you get there – the ability to track progress and what success will look like. For example, I will have £20,000 saved for a down payment by the 31st of December 2020.
A – Achievable
Your goals must be doable and realistic. After setting the goal, make sure it is doable with available resources.
R – Realistic
Determine whether the goal is really something that can be committed to. For example, wanting to buy your first home is attainable but wanting a hundred-room mansion or castle in 12 months with little or no savings is a fantasy.
T – Time bound
Goals are time-driven. In other words, you must give your goal a deadline, because a goal without a deadline is simply a dream. So, make sure that a start time and deadline are set for each goal.
For example, I will have a net worth of £100,000 by the 31 December, 2020.
E – Expressed positively
Phrase your goals in positive terms: I accomplished, I have etc. For example, “On December 2020, I broke through the £50,000 income ceiling! I doubled my income to £100,000! Now I work less and enjoy what I do.
R – Recorded and reviewed regularly to focus the mind. When your mind is on board, the rest happens naturally.
Setting SMART Financial Goals
An example of a generic financial goal would be, “I want to save money for a down payment for a house.” The same goal, after becoming a SMART financial goal would look like this:
Specific – “I need to buy my first house beginning January 1, 2021.”
Measurable – “I need to save £6,000 to cover the cost of stamp duty, solicitor and other associated fees.”
Attainable – “Can I really save £500 each month out of my monthly pay check and still be able to afford all of my monthly expenses?”
Realistic – “Since I currently spend £750 each month on food and entertainment, if I cut back to going out twice a month instead of once a week, I should be able to save £6,000 in 12 months’ time.”
Timely – “January 2021 is 12 months away, which means I need to save £500 a month.”
A SMARTER goal would be:
By the 31st of December 2020, I will have £6,000 in my account BY saving £500 each month by direct debits.
I achieved this by reducing my spending on non-essential items and services as well as asking for a pay rise at work. As a result, I have successful saved enough for a down payment to purchase my own home. I feel so great and motivated to save more and boost my income next year.
The goal is expressed positively and in the present as if it has actually happened. In addition, you have also associated positive outcomes and benefits with achieving this goal.
Top Tips to Help You Achieve Your Goal
- Focus on one goal at a time.
- Daydream about what you want to achieve
- Buy a special “goal” book to write all your goals in. Once you have written down your goal, collect photos and pictures that connect you emotionally to the goal you wish to achieve. You can cut pictures out of old magazines, print pictures from the web, make your own pictures or/and use photos that remind you of your goal. These pictures should show the end result and reflect how you will feel when you achieve your goal.
- Don’t write “I want to”, write “I will” to get your subconscious working for you.
- Determine what steps need to be taken to achieve your goal using the SMARTER principle to ensure your goal is achievable.
- Determine the cost of your goal and how much you will need to save each month to reach your desired result.
- Include your monthly goal amount in your budget.
- Review your goals and track your progress regularly – at least once a week. Reviewing it every day would be ideal. If you can, take time every day to spend at least 10 minutes looking over your goal book. The best way to track your progress is by using a calendar or goal planner.
- Create powerful questions on an index card to ask yourself that will drive you towards your goals. Keep this card with you so you can refer to it often. Examples of powerful questions to ask yourself includes:
- What steps can I take today to move me towards my goals?
- What specific action can I take to save more money?
- What works well that I could do more of to achieve my goals?
- Reward and congratulate yourself. It’s a good idea to build in some rewards for yourself, whenever you have achieved a step or made a significant effort – take time to enjoy the satisfaction of having done so. Rewards don’t have to be something that cost money. Rewards can simply be taking time to do something nice for yourself.
Start Making Things Happen!
You can achieve your financial goals this year! By following these tips, you will save time, energy, money and set clear financial goals that you will put you in a valuable financial position, no matter your current financial position.
And most importantly, you will be ready for opportunities when they come your way in the New Year. So, just get started.