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Steps to achieving financial goals

Setting SMART financial goals puts you in charge of your money and your life.

Everybody has different goals; they may be educational, social, family, health or financial goals. Financial goals are statements about things you wish you could afford; they are objectives that are expressed in or based on money. Setting financial goals is an important step to financial health. Before you set your goals, follow the SMART rules. Goals should be:

Graphics-SMART

A SMART goal would be, for example: “I want to pay off my credit card debt of R10 500 in the next six months because I can afford R1 750 a month payment according to my budget”.

“A goal is a dream with a deadline” – Napoleon Hill

Goals will differ in the length of time needed to achieve them. Short- term goals are priorities that can be achieved within six months. Medium-term goals are priorities that can be accomplished within two to five years. Long-term financial goals are those that will take more than five years to accomplish. Financial goals can be getting out of debt, meeting day-to-day expenses without borrowing, paying school fees, or saving for a special need or desire; or more long-term, such as saving for a house or retirement.

To establish your goals you need to ask yourself a number of questions:

  • Where do I see myself in five years? In 10 years?
  • Where do I want to go with my future?
  • What are my top three financial objectives?

Goal 1
What? Pay off my credit card
When? By the end of 2015
How much? R23 816.42
How? Paying R1 000 a month more than my minimum installment

Setting up Goals

This will be achieved by effective budgeting and allocating a certain percentage of your income to savings towards your goals. You will learn more about these skills in the next section.

Once you have written down all your goals, you need to prioritise your goals because you have to be realistic and understand that you cannot achieve all your goals at the same time. When you have a list of goals, you want the important goals to be at the top of the list. So by prioritising them you can determine on which goals you will need to focus first. Start by writing everything down; it might be a long list. Then read through them and circle the top five that are the most important to you (you can pick only five, so choose carefully). These are the goals for which you are going to start planning first.

Usually, you work on your short-term goals first, because they are normally the most urgent, but you can work on a medium- or long-term goal at the same time. For example, if you want to pay off your credit card debt in the next six months, you might also start saving for your retirement at the same time. The sooner you start saving for these long-term goals, the better, because of the benefit of compound interest – each year interest is added to a growing sum of money.

You will work on the less important goals once progress has been made with the really important ones. For example, if you want to buy a motorbike for weekend rides, this can only be done once your credit card is paid off and you have a fixed savings plan for your house.

“Decide what you want, decide what you are willing to exchange for it. Establish your priorities and go to work.” – HL Hunt

You should also realise that these goals might change; it is a process, but you need to start somewhere. Your financial goals or dreams will not become a reality by dreaming only. Instead, the magic will only happen when a well-planned process of action is applied to the things that matter most in your life. Make no mistake, hard work is required, and that starts with drawing up your personal budget.

Set up your budget now:

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Credit Health Tips

You need to set your goals in the right way. Why do you think 95% of people don’t stick to their New Year’s resolutions? That is because their goals are not SMART. Success can only occur if you set SMART goals and then pursue them.

Once you have set your goals, visualise them. Picture your new house. See yourself having no credit card debt. What does that look like? Can you also see yourself leaving your credit card at home when you go shopping? This will make your goals more real.