So many of us set new-year resolutions but how many actually achieve them. Financial dreams cannot be actualized without careful, consistent planning over time. Many of us confuse our dreams with our goals. Whilst they should work together in consonance, they are not the same thing. If you dream without any concrete plans or goals to support them, your dreams will not be realized unless you are lucky. Similarly if you have goals without visualizing the ultimate destination, you are likely to get caught up with the steps and not ever actualize the dream.
What financial goals would you like to work towards or accomplish in 2014? Many of us are familiar with the old acronym for the five steps of specific, measurable, attainable, relevant, and time-bound goals. This remains one of the most effective tools for reaching goals in a realistic and consistent manner. Setting “smart” financial goals can make the difference between failure and achievement.
Only by envisioning your future can you take steps to realise it. Individuals with established financial goals are at a decided advantage over those who merely react to events as they occur. The acquisition of money by itself may not be a strong enough motivator to ginger most of us into action: rather, we need to focus on tangible items or benefits. Consider all areas of your life when setting your goals. These might include buying a house or a car, setting up an educational trust for your children, funding a charitable foundation, and of course preparing for your retirement.
Quantify your goals so you can measure the result of your efforts. From your personal Balance Sheet and personal Income Statement you can ascertain your financial status and create a budget to fund your goals; How much will be needed each year, and how much more you can afford to put away towards them, on a regular basis. Treat lump sum payments and windfall income such as bonuses and gifts as a boost towards your goals.
Identify small, measurable steps you can take to achieve each goal, and put your action plan to work. If your goal is to build or buy a home, start developing your knowledge in the real estate market, make contact with Estate Agents who can keep you abreast of prices and good property offers and of course start considering the design if you plan to build.
Hastily constructed, ill-thought out goals may be a distraction. Be realistic about how much effort in terms of time and money it will take to accomplish each goal. If your goals are so difficult that they are completely unrealistic, or you have too many, you will give up in frustration as they fail to materialize. You can always set new goals as you achieve previous ones.
A goal is not a goal until you set a date to achieve it. Only those things with specific timeframes or deadlines ever get done. When do you hope to or need to meet your goals? Set an attainable target date for each goal on your list, and use this as the deadline that you can work towards.
Your short-term goals are usually goals that you can achieve within one to three years, such as enrolling yourself on a post-graduate program, buying a car, or paying down your debt. Medium term goals might include planning for a badly needed family vacation, refurbishing your home etc. For long-term goals you may need to save for five years and longer to set aside funds for retirement, or for that piece of property that you want to build on. If the date is too ambitious, you may become discouraged and lose sight of it. But don’t set a date that is so far away that it becomes meaningless. There will be setbacks; these have become a way of life in Nigeria. If something happens to delay your project, do not be discouraged, just carry on with a new date in mind.
The most important step in setting goals is implementing them. Making a list is fine, but if it is put away and never referred to it will soon be forgotten. By immersing yourself in your goals, you can drive yourself closer to them. Once you know how much money can invest, determine your asset allocation – that is, how much should be invested in stocks, how much in money market securities, and how much should remain in cash. It is worth consulting with a financial advisor who will take a look at your unique financial situation and help leverage on all of the financial resources available to you.
Keep your goals in view. Review your progress periodically, say quarterly, or at least bi-annually, to determine the progress of your plan. Be flexible though, as you may need to adjust your plans as your circumstances evolve. If you are not making satisfactory progress on a particular goal, re-evaluate your approach and adjust as necessary. Individual goals can change.
Financial planning may not make you wealthy, but it will certainly guide you towards a more secure financial future and improve it whether you are already comfortable financially or are in some difficulty. The key is to have a plan, and the determination and desire to follow it through. With goals, you will accomplish more, and improve your quality of life.