Guide to Set Financial Goals and achieve your Dreams

What is Financial Freedom?

You have probably heard of the term "financial freedom", but what exactly does it entail? The truth is, financial freedom can mean different things for everyone. For some, financial freedom can mean having the means to pursue a passion, while for others, it may involve building a nest egg for a comfortable retirement. Whatever your definition of "financial freedom" may be, know that it is not elusive and definitely attainable with adequate planning and commitment. Here's how you can start planning and realizing your financial goals.

Define what success means to you

If you were to look back on your life at a later stage, what would you have liked to have achieved? Why is that important to you?

Once you answer these questions, quantify them in concrete terms. Go beyond vague ideas of financial freedom. It isn't enough to want a home of your own; try and define what kind of home, where you want it to be, and how owning it will change your life; Or perhaps you want to build up an emergency fund worth six months' expenses.

By understanding and clarifying your desires, you set goals that accord with your personal values. Success requires commitment and perseverance. If your aims don't reflect your intrinsic beliefs, it's unlikely you're going to put in the work to make them a reality. But when you recognize how achieving your aspirations will enrich your life, the knowledge provides a sense of purpose that prevents disappointment and frustration.

Examine your personal situation

Once you know your destination, you can map out a route to get there. To do so, it helps to have a clear idea of your current financial situation. Using paper or a spreadsheet, assess your income, expenses, investment, and net worth.

A clear understanding of these elements will indicate the size of the task ahead of you and allow you to prioritize your goals. If you don't have a job or a regular source of income, for example, that takes priority over everything else.

Consider three types of goals

Financial experts recommend establishing short-term, medium-term, and long-term targets. By putting a time frame around your goals, you are able to pace yourself - and, again, head off any exasperation at not being able to achieve things quickly enough.

Short-term goals

Short-term financial goals are easily actionable items that typically take less than three years to accomplish. Examples of short-term financial goals may include creating an emergency fund, paying off your credit cards, or starting a systematic investment plan.

Medium-term goals

Medium-term financial goals typically require three to five years to come to fruition and may include paying off your student loans, starting a business, saving money for the down payment on a home loan, or planning a dream vacation.

Long-term goals

Long-term financial goals usually take more than ten years to achieve. Examples of long-term financial goals may include setting aside money for retirement, leaving a legacy for your family, or setting up an endowment for your favorite cause.

If you need to, discuss these with an investment advisor or a family member. Getting another person's input can offer focus and keep you accountable.

Apply the SMART formula

When drawing up your plans, rate them against the following parameters:

  • Specific: Be specific with what you want to achieve. For example, instead of saying, "I'm going to save up for the down payment on my house," try, "I want to save up $X by the end of next year for the home down payment."
  • Measurable: Setting quantifiable financial goals is essential to keep track of your progress and stay committed to the cause. For example, if you plan to save a certain amount of money in two years, you can set a monthly savings goal and check your progress regularly to ensure you're on track.
  • Achievable: Financial goals are not supposed to be easily attainable, but they should still be realistic. For example, if you have a $50,000 student loan to repay and you're only drawing $60,000 per annum, expecting the loan to be repaid in a year will not be practical.
  • Relevant: Check if your financial goals matter to you and whether they're aligned with the rest of your goals. For example, if you're thinking of saving up for big-ticket luxury items, you may want to consider if that aligns with your long-term wealth objectives.
  • Timely: Ensure that your financial goals are time-bound to keep you accountable and gain clarity on when you will achieve the goal. For example, if you plan to save for a wedding, set a deadline and determine how much you need to save monthly to reach the desired goal.

Each goal must necessarily conform to each of these parameters if you are to have any chance of success. With the SMART framework, you know what success looks like, how to get there, what resources you need, and what milestones denote progress along the way.

Write them down

Once you've identified your objectives, write them down. Or create a vision board and hang it above your desk. Maybe add reminders where you can see them - for example, use a picture of your target retirement country as the screensaver on your smartphone or hang it on the refrigerator. This vital step allows you to keep your ambitions organized and tangible and works as a visual stimulant to achieving your dreams.

Allocate resources for each goal

So, you know what your goals are, and you've got a clear idea of where you're going. The most crucial step is to allocate a part of your monthly income for each objective. Start with the short-term aims and work your way out. Plan to set up direct debits for immediate targets and cut out any expenses you deem unnecessary.

This process can take a fair bit of time and may require you to reframe the timeline around each goal as part of the process, so schedule a couple of hours for this exercise. For example, you may have enough to fund the down payment on a home loan right away, but you have no emergency fund. In such a case, it makes sense to save up a few months' worth of expenses first so that you don't have to worry about meeting your everyday obligations or defaulting on those loan payments.

Review your progress

Perhaps the most important part of any goal-setting exercise is a periodic evaluation of how things are going. Schedule a couple of hours once every month and ring-fence the dates in your calendar. Check how you're doing, whether you were able to meet your goals for the month, and what behavior you need to tweak going forward. Regular reviews keep you up to date and on track, allowing you to update and change them with minimal financial exposure.

Remember to celebrate each victory!

If this blog resonated with you, pay it forward by sharing it with someone who may benefit from the information here. Happy planning!

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Keith J Fernandez is an editor and communications professional who advises on marketing content strategy. He is based between the UAE, the Netherlands and India and writes about business, technology and personal finance.

This article is intended to provide general information about finance and investments and does not replace or should be taken as professional financial advice. The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article except information on Citibank N.A. – UAE products referenced herein.
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