If you are just joining us in the PFDN community, we say welcome to you and ask that you keep an open mind and be ready to learn as we bring you insights that will lead to a more robust financial knowledge.
So, the other day, we were talking to this couple who said to us that in the wake of all that happened in 2020, in December they started asking questions about what to do regarding their finances. Now, these two have good jobs that gives them security and a steady income. However, even though it could meet their needs, they quickly realized the world had changed so much in the blink of an eye that it has in fact threatened that security for which they had built their financial plan as individuals.
It was interesting that they both came to the realization that as a couple in their early 40’s with 2 young kids, their financial strategy needed to be reviewed. Now, beyond their individual goals, they realized the need for them both to have a ‘family financial goal’ that they can both be stakeholders in. They defined what that financial goal is, how to go about it, when to initiate it, etc.
Let us bring this home more to further elaborate on this story. You see a lot of us think that setting financial goals are abstract things, but we must understand that our financial goals must take into account our entry points in the life cycle journey; for it is the only way we are able to effectively design financial goals that will be realistic to our present and future situations.
So once we define this financial goal, we then need to identify the steps to achieving it. Once we are able to figure this out what is achievable in the short, mid-range and long term; then we are able to develop a SMART (specific, measurable, achievable, relevant and timely) strategy and a tight budget to achieve it; so let’s get right into the business of saving and constantly monitor your success.
Did you just roll your eyes? Laugh… the foundation of anything that relates to financial goals start with earning, and after that comes the most important this which is ‘saving’. So basically, your financial goals are savings, investment or expense targets you hope to achieve over a set period of time. Your stage in life will definitely determine the kind of goals you wish to achieve.
An example is a person with a growing family would need to have a long term goal that may be going from renting a house to owning one. Saving for a child’s education, retirement and others are just part of the typical financial goals they might have.
A certified Financial Planner, Allen Wohlwend, said “the ones who look ahead and have some concept about what they are looking to do with their money, the ones who put a plan into motion and establish some good habits; these people are golden.’ Of course, there are rules to achieving this, but they are not cast in stone. Since, no one knows definitively what next week is going to look like, the smart move will be to be prepared the best way we can.
In planning a financial goal; we might want to consider the unforeseen circumstances that can impact us whether favorably or unfavorably; so you see the goal is not having some abstract figures in our minds like some of us do. We think having 100 million today guarantees that we will always have financial freedom! There has never been anything so farther from the truth! Financial goals come with understanding the process itself, establishing good financial habits, acquiring knowledge and being consistent in the healthy financial habits we have formed.
So how do you set your financial goals?
- 1. What matters to you?
- 2. What is within reach, what will take a little time and what must you push to the future?
- 3. Let your financial goals be SMART compliant
- 4. Budget, budget and budget! Create a realistic one that best suits your financial situation.
- 5. Monitor your progress
- 6. Get help setting your financial goals.
Oh, back to the couple… their family financial goal was to set up a business that will provide an alternate income stream for their family and they could pass on to their own children. I think this is important because with the dynamics of the world changing, and having a growing family; there is the need to expand our financial goals to accommodate these changes!
We hope that this article has provided you with a little bit more insight on the need to not only have financial goals, but having the right ones and knowing that with clarity, better decisions can be made.
We are always here serving it to you hot! The goal is ‘balance’ and step by step, we will walk this journey together.
The PFDN Team.