As the year comes to an end and we sit on the cusp of a new year, it is once again time for goal setting and New Year resolutions.
“I want to loose weight, I want to read one book every month, I will spend more quality time with family and take 2 holidays with family this year, I shall quit smoking or drinking, I shall reduce Debt and so on” are the normal goals we set every year. We achieve some, we loose some and it goes on to another year.
As you may be thinking and planning for your goals for 2019, lets add some SMART Financial goals in the list, apart from the normal goals.
We all have financial goals – even if we don’t really think of them as goals per se. For example, you might want to buy a new cell phone, or a new car. You might want to take a family vacation next year, or renovate your home. Some people prefer to keep it simple when they think of goals. They want to create wealth and become rich. That’s it!
As you go about setting your financial goals for the New Year, follow the SMART goal philosophy, which essentially means:
- Is it Specific?
‘Becoming rich’ isn’t a goal. It’s a desire, or a wish.
For a goal to be achievable, it needs to have certain characteristics. For starters, it should be Specific.
The “W” questions will help you be specific when you set your goals.
- What is the goal for?
- Why do you want to achieve this goal i.e. benefits, reasons, purpose behind the goal?
- What do you want to achieve exactly?
- When will the goal occur?
- Which are the requirements and constraints?
For example, a vague goal would be ‘To become rich’.
A specific goal would be ‘Increase investments by Rs. 50,000 p.m. to have a portfolio of Rs. 5 crores within 15 years’.
- Is it Measurable?
When you set a goal, and you start working towards achieving it, it’ll always make you feel good to see how much you’ve accomplished. If you set a target and have a time-line, you’ll be able to monitor your progress and give yourself a pat on the back at every milestone passed. With every piece of your goal successfully achieved, you’ll be spurred to do even better. Map each of your investments with the specific goal and monitor it regularly.
Each month you will be able to see what you have saved, whether you need to increase your savings, or you can relax a bit and treat yourself for extra savings done ahead of time.
Just remember, the more specific the goal, the easier it is to measure.
- Is it Adjustable?
Often people make the mistake of setting goals that are too rigid, where any unforeseen event can throw the goal off course and destroy the goal achiever’s motivation to keep going. This is a mistake.
Goals are not meant to be win or lose situations. Goals are just goals. You can achieve them 100%, or 85% or 50%. You can achieve them early, or late, or if things go exactly according to plan – right on time.
Life doesn’t always go as per plan. Circumstances may arise, e.g you may lose your job or there may be a unforeseen medical or personal emergency, which may force you to dip into your contingency fund or the proposed retirement corpus and you may need to adjust your goal corpus or time-line.
Hence, your goals should be adjustable.
- Is it Realistic?
If you ask a 5 year old what they want to be when they grow up, you’ll get a response like ‘an astronaut’, or ‘a fireman’. If you ask a 10 year old, you might hear ‘a doctor’, or ‘an engineer’. As a 30 year old, you might still harbor a secret wish to walk on the moon, but this is not very realistic.
We always require more and desire far more. Apart from the mundane like the basic requirements, we always want a better house, a better car, an exotic holiday and much more. But while we can be specific about all these things, and make them all measurable and adjustable, is it realistic to say you want to achieve all this?
Have your priorities, know your capabilities, and stretch yourself a little bit to get that little and no more.
But remember, Higher the reward that you want, higher the risk you need to take. Don’t take risks you can’t afford to, and don’t set yourself up for disappointment by aiming for unachievable goals and losing your capital. And most importantly remember that money is a means to an end, not an end in itself.
- Is it Time-based?
Setting a specific, measurable, adjustable, realistic goal is great, but without a time-line, it can be difficult to measure. Saying “I want to buy a new car” is not really time-based.
Saying “I want to buy a new car worth Rs. 6 lakhs in 18 months” is time based and much more measurable. With no time frame, there’s no sense of urgency, or yardstick to measure your progress.
They say, “Whenever in doubt; to make a choice, toss a coin. You may not reach the right conclusion, but when the coin is in the air, at least you will know what your heart desires.”
The process of setting your SMART goals is an exercise that will give you incredible insight into yourself and the things you really want. It will give you a direction to follow, a roadmap to achieve your goals.
Goals can act like a map and like a conscience. The next time you’re in a Mall, considering that impulse purchase, The goals at the back of your mind will make you think, whether this fits in with your savings plan for the month, and whether it brings your goal closer or not. You can then make your decision with full financial awareness.
Goal setting is important because it is a motivation driver and helps you stay the course by prioritizing activities and concentrating on those that contribute to your goal.
Consult a Financial advisor to finalise your financial goals. He will help you set up SMART goals based on your requirement and current financial situation.
Stay Blessed Forever!