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Setting financial goals

Posted: 16 Nov 2015

3 mins to read

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Why setting financial goals can help you.

Making dreams happen

You slowly pull up in the driveway, looking up at the double storey house in front of you. As you step out of the car, your brand new smart phone rings and as you are about to answer … Then all of a sudden you wake up – you’re sitting in bed and you realise: once again it was only the same dream you have been having for quite some time now. We all know that not all dreams become a reality, but with the right planning and some serious dedication, you are able to realise your financial dreams.

Where to start

One word: Budget! The first step to take when setting up a budget is to determine what your financial goals are. You need to be very specific about what goals you wish to achieve, you need to be realistic when setting these goals, and you need to set a timeframe in which you will be able to reach these goals. Do you have a short-term goal, a mid-term goal or a long term goal? After you’ve determined your financial goals, you will need to prioritise which of these goals are more important to you. Also how long it will take to save for each one of them. To save for a new computer can take you a few months, but to save for retirement it is a long-term, monthly savings commitment.

Be realistic

For starters, you will have to calculate how much money you are getting in and how much money you are spending. You should never spend more money than you are getting in. By writing down these figures, you should be able to determine which expenses you can cut back on in order to save more for that dream house and new cell phone. Lastly, you need to calculate how much you need to put away every month for each one of the goals in order to achieve them within the time period you set. You should review your financial goals regularly (every 6 months to a year). This will allow you to monitor your progress and determine if you are still on track.

Life is unpredictable

Who never experienced a set back or two? Don’t give up during these times. Rather adjust your goal and work towards the new goal with just as much discipline as you previously had! 5 Financial goals that everyone should have:
  • A well-stocked emergency fund will provide you with some security and a backup should something unpredictable happen.
  • You need to be able to live on less than you are earn, do not spend more money than earn every month.
  • Limit your debt to only when it is really necessary. Your financial health will improve dramatically!
  • Carefully consider your expenses and cut the unnecessary ones. You’ll be surprised to learn how many things you spend money on that you don’t need.
  • Plan for a comfortable retirement. It will give you peace of mind when you know that you will be able to retire when you have to, rather than knowing you won’t be able to retire at all.