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

What financial goals do you want to achieve? 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?

Whatever it is, you first need to priotise your needs and wants or otherwise you will fail to achieve what matters most in your life.

Determine What’s Important To You

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.

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 Smart 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 three (3) to ten (10) years. 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.

Setting and achieving short-term goals is the basis for moving toward success of long-term goals. For example saving for a down payment to buy a house is a short-term goal that can be a foundation for a long-term goal of owning a house.

When setting up your goals, ensure they are SMART goals. i.e.

They are Specific

Knowing exactly what your goals are helps create a plan designed to achieve them. For example, the goal of “buying a house and stop paying rent” is not a SMART goal since it’s not specific as to the type of house, its location or price. Buying a 7M bungalow house in Nyali after 10 years time is a specific goal.

They are Measurable

The goals should be measurable. For example, the goal of “accumulating Ksh. 50,000/- in a savings account within two years” is a clear guide to planning than simply the goal of “putting money into a savings account”.

They are Achievable

Set goals that are achievable and action oriented. For example “accumulating Ksh 50,000 in a savings account within two years” will mean cutting down on other expenses to accumulate that amount in the specified time-frame.

They are Realistic

Set goals that are realistic based on your income and life circumstances. It’s probably not realistic to expect to accumulate Ksh. 500,000/- in a savings account in two years if you are a full-time student on Ksh. 10,000/- monthly upkeep money.

They have a Time Frame

The goals must have a timeframe. In the example above, the goal is to be achieved in a set timeframe of two years. A timeframe helps measure progress towards achieving financial goals.

To determine the monetary value of some of your goals, you can seek professional help from a Financial Planner, Real Estate Agent, Insurance Agent etc.

Thats it! This is how your financial goals should be set. They should posses the SMART characteristics.

The Top Four Financial Goals

Financial experts recommend to never miss these goals when setting your financial goals:

1. An emergency fund of at least 3 months of living expenses.

2. A home purchase.

3. Retirement income for living expenses.

4. College education for yourself and kids.

NEXT: Working Towards Achieving your Financial Goals

Tools to Use

1. Goal Setting Software: a simple software to help you set and track your goals with much ease.

2. Goal Setting Worksheets: 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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