Like other goals in life, it’s incredibly important to set financial goals based on your current circumstances and future desires. While it may seem daunting at first, learning how to create achievable financial goals gives you something to work towards and helps you stay motivated. Chances are, you have many things you hope to achieve financially. If you’re wondering how to manage your money better, you should set both short-term and long-term financial goals.
What are Short Term and Long Term Financial Goals?
Short-term goals are those that you can achieve within a year. Examples of short term goals would include paying off credit card debt or building an emergency fund. On the other hand, long-term goals are those that you can accomplish in five to ten years. Examples of long term financial goals would include things like buying a home, going debt-free, saving for retirement, etc.
Now let’s talk about how to set S.M.A.R.T goals so that you have a higher chance of achieving them.
Set Specific Goals
Setting specific goals is important so you'll know exactly what steps you need to take to achieve them. For example, having a goal such as ‘how to save money’ or ‘how to go about investing’ is extremely vague and doesn’t give you a specific success metric to go by. An example of a specific goal would be - “I want to save Rs 2000 every month in my emergency fund” or “I want to create a habit of saving by putting aside Rs 100 every day in my savings account.”
Set Measurable Goals
Measurable goals allow you to assess your progress and stay motivated through your financial journey. For example, take a goal like “spend less” - if you don’t know exactly how much you want to cut every week, you won’t know whether you’re succeeding.
Instead, if you say “I’ll spend Rs 1000 less each week on ordering food”, then you can check in with yourself every week and evaluate how you’re doing.
Set Achievable Goals
While it’s great to challenge yourself, if you don’t set realistic goals it makes it easier for you to give up. So start out by setting attainable goals, keeping in mind your experience and will power. For example, if you’ve never saved money before, an achievable goal would be “I’ll save Rs 50 every day.” In other words, your goals should keep your spirits up and encourage you to move along in your journey. As you attain those smaller goals, you will surely find yourself setting more challenging ones.
Set Relevant Goals
It’s important to set goals that actually matter to you and align with your life goals. For example, if you don’t really want to buy a house, you wouldn’t be excited when you save up for a downpayment. Instead, if your goal is to travel the world, then you need to set your financial goals accordingly. Also, don’t be deterred by the goals your friends and family set for themselves - after all your goals are unique to you and need to bring you an innate joy. To come up with relevant goals, write down where you see yourself in 5 years’ time - what does your life look like?
Are you debt-free?
Do you have an independent house with a garden?
Or are you travelling the world and sharing your stories through a blog?
Once you've got an idea of what you hope to accomplish one day, you can begin to break down these objectives or life plans into specific, relevant, and measurable financial goals.
Set Time-Bound Goals
As any other goal you may set, you need to ensure your financial goals have a specific deadline to it. This helps you measure your progress along the way and take proactive action if needed. For example, if you have a goal of “saving 3-6 months worth of living expenses in an emergency fund” you need to set a timeline to this so that you stay on track and actually succeed.
Setting S.M.A.R.T financial goals is one of the key pillars to your financial journey. Take some time and introspect on your life goals and accordingly set up relevant financial goals. It will motivate you every day to work towards something that matters to you and remember to keep measuring your progress.