Hopefully you’re convinced of the importance of personal finance goal setting and that you are now eager waiting to hear how to set finance goals. Great!
As gangsters in movies say: “If you don’t start nuthin’, there won’t be nuthin’”.
Remember that for the purposes of this discussion, goals are there to modify your behaviour. You’re not meant to become a mindless minion and be so focused on your goal that you forget to live life and react to changes as they happen. Rather, your goals should help you narrow your focus, encourage you to work harder and ultimately allow you to monitor your progress towards your desired outcome.
Your goals may change over time. Perhaps you look back in a few months time and decide to change your goals based on what you’ve learned; that’s absolutely fine. Or perhaps your job situation has changed and your goals need to change accordingly.
Likewise, you may not yet know what money means to you and committing to longer-term goals is not realistic for you right now – that’s also fine, nobody expects you to have figured it all out yet.
Why not bookmark this page? If you only decide what it is that you want to be or achieve at a later stage, you can find your way back here for some solid advice on how to begin.
For those of you who know what you want, or are inquisitive to see what this is about, here are the crucial characteristics as to how to set good personal finance goals, better goals and the best goals.
What do you want? Specifically.
Your goals should be clearly defined. Further, write them down.
Many studies show that individuals who can record their goals in writing are significantly more likely to succeed at achieving their goals than those who don’t.
Having your goal stare you in the face every day acts as your own accountability partner; more difficult to hide from than the moving target in your head, somewhere between “get new tyres for the car” and “try out that new Greek restaurant around the corner”.
“Doing your best” at something also doesn’t cut it. Define an ‘end-state’ or objective outcome. Failure to have an unambiguous goal will leave you feeling anxious or frustrated about your progress, when in the months to come you lose sight as to what it is that you’re actually trying to achieve.
Be sure that you can measure your goal.
Now is not the time for vague outcomes. Attach monetary values to your goals if it’s relevant. Dates, amounts, measurable outcomes and values are required. You want to know if you are 10% of the way or 80%.
When will it be done?
Your goal cannot be open-ended. Without a deadline, your goal is nothing more than an idea. Commit to reaching milestones along your quest.
There are short-term goals and long-term goals. Consider dividing your long-term goals up into smaller short-term goals to make them feel more attainable. This is called “chunking down” a problem, or “baby steps”.
If you cannot attach a date to a desired outcome because you have no idea what’s reasonable in terms of reaching that state, that’s also fine. If you want to get rid of all your debt at some stage in your life, expecting to do it in five years’ time might not be realistic. Commit rather, to eliminating a rand value of your debt in twelve months’ time. If you succeed, you now have a better idea of what is achievable in the long run. Remember that you are allowed to change your goals along the way.
Give yourself a challenge.
You’ll be more motivated to achieve an outcome when you think your actions will produce a positive outcome and when you value these outcomes.
The right amount of challenge is crucial for your goal to be engaging. Too much challenge and it all seems despondently pointless. Not enough, and the reaching of the goal suddenly seems ‘not worth it’.
You want a balance of ‘achievable-stretch’. Be aware though that your previous successes or failures in matters personal finance may encourage you to set lower or more formidable goals. Make sure that your goals are set with a clear and conscious mind.
Make sure it’s something you really want.
Choosing something to pursue that is not meaningful to you is silly. When things get tough and you’re tired, the unimportant goals will become even less important and you’ll probably give up on them. Align your goals with your values.
“Mastery goals”, the new sliced bread of goals.
We talked previously about “mastery” or learning goals. If you’ve decided that personal finance is something that you would like to know more about, it might be harder to set a more traditional goal for a learning-based outcome. Given also that if you’re reading this now, there are likely a huge number of personal finance ideas and concepts that you aren’t even aware exist, so setting goals to learn about them is not possible.
Rather, consider something like committing to reading a number of relevant articles per day or watching a set number of personal finance videos per week.
Find people to follow on social media and set a goal to learn about a specific topic or to simply ask the questions you’ve been too shy to ask.
Here are South African finance people that I follow on Twitter.
Examples of how to set finance goals.
Here are some example of how to set personal finance goals based on the principles above.
Clear outcome, measurable, has a set date, is challenging (but not too much).
- I want to save R25,000 by the end of 2020 for my holiday to Mauritius.
- I want to pay off my vehicle finance earlier by paying an extra R500 per month in my monthly instalments.
- Starting next month, I want to draw up a budget, stick to my budget and understand where and how I spend my money for a full 12 month period.
- I’d like to start contributing at least R800 per month to a formal retirement savings vehicle (product), outside of my formal job, beginning in the new year.
You are now officially fully armed with enough to get you started. Hopefully you’re also convinced of the importance of setting personal finance goals as well as how to start piecing together some of the very best of your own.
Just in case you were about to run off and tell everyone you know about your fantastic goals, here is an interesting TED Talk about keeping your goals to yourself. We’re used to been told that we need to share our goals to stay accountable.
