As gangsters in movies say: “If you don’t start nuthin’, there won’t be nuthin’”.
Hopefully we convinced you of the importance of personal finance goal setting. By now you’re waiting eagerly to hear from us on how to set personal finance goals and draw up your own financial roadmap. Or, more likely, you wandered back to your WellSpent bookmark, considered checking your Likes for the seventeenth time today, and decided rather to go with “building a future life”. Well done.
Remember that for the purposes of our discussion, goals are there to modify your behaviour, not in the sense that they subconsciously subvert your actions and turn you into a mindless minion, rather that they narrow your focus, encourage you to work harder and ultimately allow you to monitor your progress towards your desired outcome.
Your goals may change over time. It may be that in several months’ time when we start discussing what investing is all about, you may decide to change your goals based on what you’ve learned; that’s absolutely fine.
Likewise, you may not yet know what money means to you and committing to longer-term goals is not realistic for you right now – that’s also fine, nobody expects you to have figured it all out yet.
We’d therefore encourage you to bookmark this particular article so that should you only decide what it is that you want to be or achieve at a later stage, you can find your way back here for some solid advice on how to begin.
For those of you who know what you want, or are inquisitive to see what we have to say, here are the crucial characteristics as to how to set good personal finance goals, better goals and the best goals.
What do you want? Specifically.
Your goals should be clearly defined. Further, write them down.
Many studies show that individuals who can record their goals in writing are significantly more likely to succeed at achieving their goals than those who don’t.
Having your goal stare you in the face every day acts as your own accountability partner; more difficult to hide from than the moving target in your head, somewhere between “get new tyres for the car” and “try out that new Greek restaurant around the corner”.
“Doing your best” at something also doesn’t cut it. Define an ‘end-state’ or objective outcome. Failure to have an unambiguous goal will leave you feeling anxious or frustrated about your progress, when in the months to come you lose sight as to what it is that you’re actually trying to achieve.
Be sure that you can measure your goal.
Now is not the time for vague outcomes. Attach monetary values to your goals if it’s relevant. Dates, amounts, measurable outcomes and values are required.
When will it be done?
Your goal cannot be open-ended. Without a deadline, your goal is nothing more than an idea. Commit to reaching milestones along your quest.
There are short-term goals and long-term goals. Consider dividing your long-term goals up into smaller short-term goals to make them feel more attainable. This is called “chunking down” a problem, or “baby steps”.
If you cannot attach a date to a desired outcome because you have no idea what’s reasonable in terms of reaching that state, that’s also fine. If you want to get rid of all your debt at some stage in your life, expecting to do it in five years’ time might not be realistic. Commit rather, to eliminating a rand value of your debt in twelve months’ time. If you succeed, you now have a better idea of what is achievable in the long run. Remember that you are allowed to change your goals along the way.
Give yourself a challenge.
You’ll be more motivated to achieve an outcome when you think your actions will produce a positive outcome and when you value these outcomes.
The right amount of challenge is crucial for your goal to be engaging. Too much challenge and it all seems despondently pointless. Not enough, and the reaching of the goal suddenly seems ‘not worth it’.
You want a balance of ‘achievable-stretch’. Be aware though that your previous successes or failures in matters personal finance may encourage you to set lower or more formidable goals. Make sure that your goals are set with a clear and conscious mind.
Make sure it’s something you really want.
Choosing something to pursue that is not meaningful to you (see article) is fraught with danger. When things get tough and your resolve tested, suddenly that goal you wrote down in June is less engaging when life starts competing for your time and resources. Align your goals with your values.
“Mastery goals”, the new sliced bread of goals.
We talked previously about “mastery” or learning goals. If you’ve decided that personal finance is something that you would like to know more about, it might be harder to set a more traditional goal for a learning-based outcome. Given also that if you’re reading this now, there are likely a huge number of personal finance ideas and concepts that you aren’t even aware exist, so setting goals to learn about them is not possible.
Rather, consider something like committing to reading a number of relevant publications per day or this series of WellSpent articles. We promise we’re not a cult.
If only there were some examples!
To help you we’ve listed some examples of personal finance goals that best illustrate the principles as discussed above.
- I want to save R25, 000 by the end of 2016 for my holiday to Mauritius.
- I want to pay off my vehicle finance earlier by paying an extra R500 per month in my monthly instalments.
- I want to draw up a budget, stick to my budget and understand where and how I spend my money for a full 12 month period, starting on 1 May.
- I’d like to start contributing at least R800 per month to a formal retirement savings vehicle (product), outside of my formal job, beginning in the new year.
You are now officially fully armed with enough to get you started. Hopefully you’re also convinced of the importance of setting personal finance goals as well as how to start piecing together some of the very best of your own.
Just in case you were about to run off and tell everyone you know about your fantastic goals, here is an interesting TED Talk about keeping your goals to yourself; Telling someone your goals makes them less likely to happen.
 Latham, Gary P.; Budworth, Marie-Hélène (2006), “The Study of Work Motivation in the 20th Century”, in Koppes, Laura L., Historical Perspectives in Industrial and Organizational Psychology, Lawrence Erlbaum Associates, p. 366
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