Step 6 – How to get money savvy: Goal setting
The first time I set a financial goal was when I was 32 years old. It was a skill I needed to learn. I needed to formulate a plan to achieve my goals and I can honestly say that goal setting was one of the biggest drivers in changing my financial situation. I still set goals for myself each year because Goal setting gives meaning and direction. Setting financial goals helps us focus on our finances.
Setting – goals marks the beginning of financial planning to help you achieve your goals and objectives at various stages in your life.
What are financial goals?
Financial goals are targets for you to achieve in the future and like our values we all have our own individual goals to achieve. Financial goals are goals that revolve around finances and money.
A financial goal might be getting out of debt or saving for a specific item you can’t afford right now like a wedding. Saving for retirement or buying a new home.
Like all goals this goal needs to be time based. Goals are either short term, medium term, or long-term goals.
Different types of goals:
We have short term, medium term, and long-term goals.
Setting short-term, mid-term and long-term financial goals is an important step toward becoming financially secure. If you aren’t working toward anything specific, you’re likely to spend more than you should.
Make sure your goals are realistic and flexible. If you set your goals too high, you are less likely to achieve them.
Short-Term Financial Goals: (3 months or less)
Short term goals can be easily achieved in a short space of time
E.G. Save R2500 for a new TV
Medium term goal: (4 months to 2 year)
Mid-term goals are priorities that can be accomplished within 4 months to 2 years
E.G) Saving R45 000 for a holiday or paying off debt
Long term goals (More than 2 years to achieve)
Long-term financial goals are priorities that may take more than two years to accomplish. Most long-term goals require regular savings.
E.G) Saving for a kid’s university education or saving for retirement,
Setting short-term financial goals can give you the confidence boost and foundational knowledge you need to achieve larger goals that will take more time. These first steps are relatively easy to achieve. Achieving small victories will drive you to achieve your medium and long-term goals easier.
Annual financial planning gives you an opportunity to formally review your goals, update them (if necessary) and review your progress since last year. If you’ve never set goals before, our Money Savvy programs give you the opportunity to formulate them for the first time so that you can get – or stay – on firm financial footing.