Why do goals matter to your financial plan? Simply put, a financial goal acts like a roadmap for a journey. It gives you a general direction to aim at, together with actionable steps to get you there. Without a goal, financial problems often emerge. Savings may be spent prematurely. Investments may not be managed efficiently, and so forth.
Below, our financial advisers in Teesside explore why goal setting and reviews are so crucial to long-term success. We hope these insights are helpful. Please contact us for more information or to speak with a financial adviser:
t: 01228 210 137`
e: [email protected]
Identifying your vision
Many people lack any financial goals and simply live for the moment. Others have a vague goal, such as a desire to save or repay their debts. However, the result is often inefficiency and a lack of commitment.
However, a financial plan takes things a step further. Rather than tentatively holding ill-defined hopes, you can identify a vision and work towards it. This involves getting specific about what you want to achieve. What do you dream about, and how will you get there?
Setting a specific goal is a good place to start. An example from relationships might help to illustrate this. Rather than having a goal of spending more time with your spouse or partner, you could have the goal of: “I will do this by having two date nights a week together.”
Developing a system
The list of possible financial goals is endless. So, how do you choose which one(s) to focus on? The SMART system is a popular way to generate ideas, narrow down on vision-filled goals, and provide a framework for helping you achieve them:
- Specific
- Measurable
- Achievable
- Relevant
- Time-bound
Here are some ideas of broad financial goals to consider:
- Clearing “bad” debt (e.g. unpaid credit cards)
- Building an emergency fund
- Creating a new business
- Building up a retirement pot
How can we make these more SMART? Let us take the first one above. Here, we could refine it a bit like this:
- Specific (“Repay all of my credit card debt with Y Bank”)
- Measurable (“Repay £100 per month”)
- Achievable (“I can afford to do this”)
- Relevant (“Doing this will help me stabilise my finances and achieve other goals”).
- Time-bound (“I intend to clear this debt in 12 months’ time)
Prioritising goals
It is likely that you will have multiple financial goals. How do you focus your attention and financial resources appropriately? Here, the Eisenhower Matrix can be useful. It is a task management system, which classes objectives as follows:
- Urgent and important
- Urgent and unimportant
- Important but not urgent
- Not important and not urgent
For instance, an “urgent and important” financial task may be to pay an outstanding energy bill. A “not important and not urgent” task could be something distracting and worthy of disregard (such as learning how to “time the market”).
Here at Vesta Wealth, we recommend that new clients focus on the most urgent and important tasks first, i.e., identifying threats to their financial stability and addressing them. This may involve rebuilding a depleted emergency fund or establishing healthy budgeting habits.
With these short-term goals progressing nicely, attention can be turned to longer-term goals, such as building up a retirement fund. Here, milestones will be important as you move along your financial journey. They act as signposts that you are moving in the right direction, encouraging you and keeping you motivated.
For instance, saving for retirement can be a process that lasts 20 years, 30 years, or more. That is a long time to stay disciplined and focused! One idea for milestones is to have an overall “target number” for your eventual retirement fund (e.g. £500,000), and “smaller targets” along the way (e.g. £30,000 by year 5). By reaching ‘smaller’ milestones on the path to reaching your target it can provide greater motivation to stick to your financial plan.
Here at Vesta Wealth, our online client portal is a useful digital tool to help our clients with this process. The system allows you and your adviser to set goals for your finances, helping you to measure your progress towards reaching that goal.
Staying nimble amidst change
Having goals is important. Yet, what if your needs or circumstances shift? This is where regular reviews with a financial adviser can help. Here, you can track your progress and discuss any big changes requiring a new approach (e.g. the recent birth of a first child).
Being adaptive does not negate your previous financial goals. Rather, it empowers you to stay focused amidst life’s inevitable changes. A vision is vital to boosting a deep sense of wellbeing and providing a sense of purpose, achievement and satisfaction.
Remember, financial goals are not all about money. Maybe you plan to raise children who are highly “financially literate” (able to make good financial decisions independently). Perhaps you hope to enjoy more financial freedom in later life, enabling you to spend more time with family, travelling, or pursuing passion projects.
Also, remember to write your goals down and consider posting them somewhere you will regularly see them!
Invitation
If you would like to discuss your financial plan and investment strategy, then we would love to hear from you. Get in touch with your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.
Reach us via:
t: 01228 210 137
e: [email protected]
This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.