Set goals to achieve your financial dreams

Financial freedom doesn’t have to be elusive. On the contrary, all it requires is a roadmap and committed action. The beginning of a new year offers the perfect opportunity to do so.

The process begins with defining your objectives. Setting goals puts you on the path to financial security, while taking care of obligations, allowing for unexpected expenses, and planning for your retirement.

We all know what we want to achieve. Yet, the emotional issues many of us have around money often prevent us from addressing our finances, leaving us to regret not acting in time. However, with some careful thought and a strategic action plan, it’s fairly straightforward to turn your dreams into reality. To improve your chances of success, you need to follow a strategic approach to financial goal setting. A step-by-step approach can help.

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 where your destination is, 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 targets for the short term, medium term, and long term. 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 targets are smaller, easily actionable items that boost your confidence and spur you on to the bigger-ticket items that take more time. Such quick wins should be items you can achieve within a year and may include creating an emergency fund, paying off your credit cards or opening a systematic investment plan.

Mid-term aims require three to five years to come to fruition. Examples include paying off your student loans, starting a business, collecting money for the down payment on a home loan or planning for a dream vacation.

Bigger ambitions, such as buying a home, are necessarily long-term plans because of their larger ticket size. Such intentions typically also include setting aside money for your retirement or leaving a legacy for your family or an endowment for your favourite cause.

If you need to, discuss these with an investment advisor or perhaps with 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
  • Measurable
  • Achievable
  • Relevant
  • Timely

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 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 important 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 behaviour 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 you think 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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