Kicking Financial Goals
“The most important thing about goals is having one” – Geofferey F. Abert
We are all aware – at least to some extent – of the reasons why smart financial behaviour is so highly recommended. Not overspending. Encouraging saving. Greater independence. All of these ideals can be greatly encouraged by making intelligent financial decisions, and financial plans are a positive way of analysing and measuring our performance in order to hold ourselves accountable and ensure success.
When asked what their financial goal is, many people will respond with the notions of financial freedom or independence. However, these notions are largely immeasurable and variable between person to person and do not really constitute effective financial goals. The basis of goal setting theory is the process of setting specific and clear goals to be accomplished accompanied by an action plan and timeframe on how these goals will be achieved. Having financial freedom or independence as an end goal comprises of too much ambiguity to have an associated objective action plan and should therefore be avoided
Your financial goals need to be SMART; Specific, Measurable, Attainable, Realistic and Timely. Let’s continue the with the notion of financial freedom, which in itself is not a financial goal. Let’s envision that you are fifty years of age and with enough foresight planning to be concerned with achieving ‘financial freedom’ for your retirement. The first step would be to analyse your current finances, which a professional at MW Lomax could assist you with, and establish exactly how much money is needed for you to live a comfortable retirement lifestyle. Let’s say for arguments sake that it is determined that you will require $1,500,000 in retirement funds, yet your current superannuation projections will only equip you with $1,200,000 in retirement funds – meaning that you will have to actively contribute $300,000 over fifteen years – or $20,000 a year. Yet with compounding interest, this annual contribution figure would continue to fall. This end goal of $1,500,000 is specific, measurable at $20,000 a year, attainable, realistic and timely. There is no ambiguity regarding your end goal or what you need to do to achieve it.
Depending on your stage in life, current financial position and a variety of other factors, your financial goals will be unique and individual. Where necessary, you should seek the advice of a professional financial planner in analysing your current position and establishing realistic objectives. Furthermore, your financial goals may be short-term (such as becoming debt free) or long-term (such as retirement) or you may have multiple financial goals simultaneously. But ambiguous or generic notions such as ‘financial freedom’ should be avoided, as they provide no actionable plan on how this ideal will be achieved.
Why don’t you contact MW Lomax to help create your goals with you and put a plan in place to achieve them?