The importance of financial goal setting
Getting started is the most difficult step for those new to financial planning. But it all starts with having financial goals. Goals give you a target and help you focus on the things you really want to do with your money.
Building wealth and managing spending involves some short-term sacrifice. Sacrifice becomes a lot easier when you know why you’re doing it. So, the first question you need to ask yourself is why am I doing this?
Related reading: Six simple steps to setting financial goals
A goal without a plan is just a wish.
One of the best things for people feeling lost or hopeless is to accomplishing a goal. This is because having a sense of accomplishment is important for our emotional health. One of the first rules of goal setting is to ensure that your goals are SMART – meaning specific, measurable, achievable, realistic and time-targeted.
I always recommend starting small, with something easily achievable. So, achieving a small goal can be fun and should give you the confidence to keep going and to accept greater challenges.
Find out where you are
Imagine being in a huge, unfamiliar shopping mall. You are trying to find a shop on the map. The map shows you where the shop is but how could you possibly find it without knowing where you are?
The same principle applies in goal setting. Finding out where you are now is crucial to any plan and this can be done by taking stock of your net worth, including your income, expenditure, assets, debts, insurance, pension plans, savings and investments and Wills.
Discover where you want to be
This is where you close your eyes and visualise. What do you want to have achieved financially in five years’ time? What about in ten years or at retirement? Are you thinking about ways to increase your net worth? You can have separate goals for different time frames, breaking it all down into short term, medium term and long-term goals.
A short-term goal may be to get out of debt or to build an emergency fund. A medium-term goal may be to save for a house deposit, whilst a long-term goal may be to plan for retirement. It is always worth writing your goals down and revisiting and refining them regularly.
Explore the different ways of getting there
You may have heard the phrase; “failing to plan is planning to fail.” Having a game plan is crucial if you’re serious about achieving your targets. This applies to short-, medium- and long-term goals.
Financial goals don’t have to be set in stone. They are there to be revisited and revised as your life evolves and your priorities change. Talking to someone about your goals makes them real and tangible. This is where engaging with a financial adviser should help.
Have a good coach in your corner
Having goals is one thing however transferring them into reality is quite another. Just as top athletes engage with sports coaches to help them achieve their full potential, engaging with a financial coach could give you the edge you need to smash your financial targets.
The best financial advisers act as financial coaches, and coaching extends beyond just financial advice. Your financial coach may help you with career advice, crucial decision making as well as helping you make financial plans. and they will challenge you and remind you why you are making these sacrifices.
Most importantly, having someone in your corner who has your back and is willing to listen could make the difference between winning or losing. So yes, it’s time to get started.