How to become a marksman with your money – the art of financial goal setting
There is a lot more to goal setting than simply scribbling your hearts deepest material desires onto a sheet of paper and hoping like hell that one day you’ll earn enough money to afford them. From putting your kids through college to paying off the mortgage on your dream home, knowing how to set and implement your goals is absolutely essential.
When it comes to the value and importance of setting goals, Yogi Berra said it best when he quipped “If you don’t know where you are going, you’ll end up someplace else.” For New Zealanders, young and old alike, that someplace else is beginning to take on a more sinister aspect in the face of an escalating housing crisis, rising interest rates and an economy that is behaving with about as much certainty as a snowflake in a windstorm.
For those who wish to navigate the oncoming gauntlet of money draining dangers unscathed, perhaps the wisest course of action would be to sit down with a pen, a calculator and a comprehensive financial goal setting tool to guide you through the process of mapping out your financial future. For the rest, there is always the option to embrace a ‘let it be’ approach to money management and see where the winds of destiny blow you – which, more likely than not, will be right into the realm of scratching a living to make ends meet, or worse yet, into the gaping red maw of credit card debt.
Financial goal setting
Contrary to popular belief, mapping out your financial future involves a lot more than simply jotting down all you desire, like one big Christmas list, and then throwing in a generous portion of wishful thinking. Whilst owning a Maserati Grancabrio is an admirable objective, for the regular Kiwi raking in the national average of $48,600 NZD, it simply isn’t an option. This brings us to a very important point – when setting down your financial goals it is essential to plan based on your current income, not the income you envision having 1, or 3 or even 5 years from now. Having as your objective a change in income bracket is not a financial goal, it’s a career goal – big difference. What you’re looking to create here is a practical, believable and most importantly achievable roadmap to attaining what is within your financial scope to attain over a pre-determined time frame.
When setting down your financial goals it is essential to plan based on your current income, not the income you envision having 1, or 3 or even 5 years from now.
Once you’ve become clear on what it is you want, how much it will cost and how long (realistically and based on your current income) it will take you to attain, then it’s time to prioritize. Going after all your goals at once is much akin to drilling for gold by digging in one area for a little while before scampering over to another area and then another and then another. Rather, you’re going to want to select the top two or three goals that are most important to you and direct all of your attention and energy onto them.
The final step in any goal setting process is taking action. It is very important to identify and implement small, measurable steps that you can take each day, week and month to move you closer to achieving your goal. Action steps can include something as seemingly small and insignificant as foregoing your daily latte’ to something more consequential, such as opening up a separate savings account into which a portion of your monthly salary is automatically deposited into.
So, whether you’re looking to secure an affordable home loan, climb out from under a mountain of debt, save up for your retirement or simply just sip a glass of fine wine under a Tuscan sunrise at the end of the year, drawing up a simple, effective and achievable financial plan is without doubt the best way to ensure that you end up where you want to go.