Setting Financial Goals | Achieve what Matters Most by Setting SMART Goals

setting financial goals

Are you drifting through life or you have financial goals to accomplish? What is it that you want to accomplish or achieve in your life? Is it about buying or building a new home, purchasing a new car, save for your child’s higher education, or building a sufficient emergency fund? 

Without goals, and plans to reach them, you are like a ship that has set sail with no destination. - Fitzhugh Dodson

Whatever it is that you desire to have or achieve, will only come to pass if you make it a goal to pursue.

Determine What’s Important To You

This is your starting point; determining what's important to you. There is no point of pursuing something that won't bring any real happiness or fulfillment in your life. 

What's important to you?

That's what you need to figure out before you decide to focus your financial resources on anything. If you are alone, go ahead and decide what matters to you. If you have a family discuss with your partner or family members on this one.

Communication and joint decision-making are particularly important when it comes to managing family finances. The values you identify will help you to determine the direction you would want to take with your personal/family finances. You will need to sort out the things that are most important to you and your family and those that are sort of important and last those that aren’t very important.

You will need to priotise your needs and wants or otherwise you will fail to achieve what matters most in your life.

What you get by achieving your goals is not as important as what you become by achieving your goals. - Zig Ziglar

Use the worksheet on the 'tools to use box' below to select the things that are most important to you and your family and place an “A” beside them. Place a “B” by the things that are sort of important. Place a “C” beside the things that aren’t very important.

When you are done, compare what you have filled in the table with your personal cashflow statement. What you should find out is: are you currently spending money on things that are really important to you and your family? If not, its time to make the necessary changes in your spending.

How to Set Up And Achieve Your Financial Goals

After you have priotised your needs and wants, you can now proceed to set up smart goals to achieve them based on your list focusing most on high priority items.

Financial goals should identify what you want to do with your money within a given period of time. Goals give you a purpose for the way you spend your money. Think about the things you want your money to do for you now and in the future.

Financial goals can either be Short, Intermediate (Medium) or Long term.

  • Short-term goals: are set to be achieved within the shortest time possible.
  • Intermediate or Medium-term goals: have a time-frame of two (2) to five (5) years.
  • Long-term goals: take a time-frame of five (5) to ten (10) years or more. Examples include retirement savings, college fees for your children or purchase of a house. These goals should be planned in coordination with short-term and medium-term goals.

NB: Setting and achieving short-term goals is the basis for moving toward success of intermediate and long-term goals.

Every single life only becomes great when the individual sets upon a goal or goals which they really believe in, which they can really commit themselves to, which they can put their whole heart and soul into. - Brian Tracy

setting SMART goals

To achieve your goals, they have to be SMART. I will use the example of a long-term goal of owning a house and stop paying rent to explain. Ready?

S - Specific

A goal has to be specific. Knowing exactly what your goal is helps create a plan designed to achieve them. To our goal example: “Owning a house and stop paying rent” - is not a SMART goal since it’s not specific as to the type of house, size or its location. Owning a 3 roomed bungalow on a quarter acre piece of land in Nyali, Mombasa. is a specific goal. You can be more specific than that.

M - Measurable

A goal has to be measurable. What's the cost of the house you want to own or buy? Lets revisit our goal again and make it more SMART: Owning a Ksh 3.5m - 3 roomed bungalow on a quarter acre piece of land in Nyali, Mombasa. is a goal that can be measured.

T - Time Frame

A goal must have a timeframe. Hey pal, our goal example doesn't have a time-frame. When do we expect to have achieved our goal? A timeframe helps measure progress towards achieving financial goals. So, lets make our goal more SMART again: Owning a Ksh 3.5m - 3 roomed bungalow on a quarter acre piece of land in Nyali, Mombasa in 25 years time (alternatively we can say: by 2036). This means we have 25 years to accomplish our goal. In between, we can evaluate our progress towards accomplishing our goal.

Now, if you look at our goal, it is specific, measurable and has a time-frame for achieving it. Is that all?

No! Thats not all.

R - Realistic And Achievable

A goal has to be realistic. Based on your financial resources, other goals and life circumstances, can you achieve your goal? Looking at the our goal example again, can we afford to purchase a Ksh 3.5m bungalow in Nyali, Mombasa by 2036? Is the price too high or the time-frame too short to achieve it?

The only way you can find out if you've set a realistic goal is to evaluate your current financial position and find out the financing options available. Having done that, you'll be in a position to know if you can afford to achieve that goal.

A - Action Oriented

A goal must be action oriented. How will you achieve it? What plan have you put in place to achieve your goal? You know you have to do something otherwise your goal will be just a wish.

Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success. - Stephen A. Brennan

Back to our goal and let's wrap it up now:

Our goal is a long-term goal. Hence, there are short and intermediate goals that we will need to put in place so that we can accomplish it. How we will set our short and long term goals, will depend on how we intend to acquire the property.

For the purpose of our example, lets decide to acquire the property using a home loan (mortgage). But we don't want to take 100% financing. We want to put a down-payment of say 20% of the property value but we want to raise the down-payment in 5 years. That's about Ksh 700,000.00 which will require a monthly saving of approx. Ksh 12,000.00.

Can we afford Ksh 12K every month for that goal? Lets assume we can not at the moment. So, this means we need a plan of raising Ksh 12K every month. Our short and intermediate goals will look like this:

  1. Short-term goal: Save Ksh 12K every month towards raising a down-payment. This might involve cutting down on some expenditures and/or using some business profit (if we have a business) to raise Ksh 12K.
  2. Intermediate goal: Raise Ksh 700K as down-payment of a house in 5 years.

After 5 years, with our Ksh 700K in the bank, we can look for a home loan with the best terms to purchase our dream home.

As you can see, if we focus on the short-term goal and ensure that we are able to accomplish it every month, we will be able to meet our intermmediate and long-term goals with much ease.

Crystallize your goals. Make a plan for achieving them and set yourself a deadline. Then, with supreme confidence, determination and disregard for obstacles and other people’s criticisms, carry out your plan. - Paul Meyer

That's it! Now, can you go ahead and set up your SMART financial goals? There are some tools to use in the tools box below.

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Tools to Use

  1. Goal Setting Software: a simple software to help you set and track your goals with much ease.
  2. Goal Setting Workshes: use these worksheets to prepare your financial goals. (zip file)
  3. Priority Setting Worksheet: use this worksheet to determine what important to you/family. (zip file)

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