What Do I Do If I Am Unclear About My Financial Goals

Setting, Reaching, & Exceeding Your Financial Goals

Without clear goals, it can be difficult to chart a path towards financial freedom. Financial goal-setting provides a road map that guides you towards achieving a desired financial outcome, whether it’s reducing debt, achieving a comfortable retirement, or owning your dream home.

In this article, we discuss the importance of financial goals, as well as the tools and professional support you need to create SMART goals.

Why Financial Goals Are Important

Financial goals provide an effective way to spend and save money, both at a personal and professional level. The right financial goals can help you improve your lifestyle, manage debt, and achieve an enjoyable retirement.

The Role of Clear Goals in Financial Success

Financial goals are more than just ambitious dreams. Setting goals gives structure to those dreams and provides a realistic path to actualizing them. Clear goals, whether short-term or long-term, provide the motivation and sense of direction you need to turn dreams of financial success into reality, one step at a time.

How Undefined Goals Can Impact Your Finances

If you don’t have a specific goal in mind, you can easily lose sight of the important things to spend your money on. You’re also likely to spend more than you can afford, and find yourself in a situation where you can’t meet unexpected bills or contribute towards your retirement plan. Worse still, you could get into a vicious cycle of debt and end up being unable to take care of crucial expenses like insurance or your medical cover.

Signs You Might Be Unclear About Your Financial Goals

Financial planning can be unexciting, complicated, and time-consuming to a lot of people. As a result, few people take time to set out their financial goals. Statistics show that only 36% of Americans have a written financial plan.

Difficulty Prioritizing Financial Decisions

Rather than using rational analysis, many people make financial decisions based on emotions, leading to poor outcomes. Difficulty in prioritizing financial decisions can be seen in habits like impulsive buying or letting biases and fear of missing out influence your investment decisions.

Feeling Overwhelmed by Long-Term Planning

Sometimes, your financial goals overlap. For example, you may want to take that family vacation you’ve been putting off, remodel your living room, or put more money into your child’s college fund—all while trying to cope with ever-rising household expenses. When several needs compete for your attention in this manner, you can feel overwhelmed to the point that you’re unable to prioritize your long-term financial goals.

Lack of Motivation to Save or Invest

Saving money can give you financial independence and peace of mind by providing a financial cushion in case of unexpected expenses or emergencies. Unfortunately, those who set aside money for a rainy day are in the minority, with statistics showing that only 3 in 10 people have some savings in the US, and 27% of US adults have no emergency savings at all.

Reasons for this lack of motivation:

Lack of financial literacy, which leaves many people feeling intimidated and confused about money matters.
A feeling that they don’t get paid enough to invest and that their pension fund, no matter how small, will be enough to fund their retirement.
A notion that there isn’t time to seek out the right investment opportunities.
Feeling overwhelmed, stressed, or burnt out trying to cope with day-to-day life pressures.

Steps to Clarify Your Financial Goals

When seeking clarity on your financial goals, it’s not enough to know what you want to do; you must find a good reason for doing it. Attaching reasons to your financial goals helps put them in perspective and fuels the motivation to act on them.

Assessing Your Current Financial Situation

This involves examining your income, expenditure, assets, and liabilities to find out your net worth and pinpoint areas for improvement. It’s an important step towards regaining control of your finances and enhancing your credit rating.

A financial assessment is most effective when carried out annually and following a significant life event like death, marriage, divorce, or birth. Before starting the exercise, make sure important financial documents like bank, credit card, or loan statements are gathered for reference.

Identifying Short-Term vs. Long-Term Goals

Good financial planning starts with setting short, medium, and long-term goals:

Short-term goals: Those you expect to fulfill within a year, such as paying for a vacation or wedding.
Medium-term goals: Goals with a scope of one to five years, such as buying a car or starting a business.
Long-term goals: Those you want to achieve in more than five years, such as paying off your mortgage.

Savings for short-term goals can be kept in high-yield accounts, while long-term goals require investment in growth-oriented securities such as stocks or bonds.

Understanding Your Values and Priorities

Financial values impact the way you spend, save, and invest money. By better understanding your values, you can make rational decisions that align your finances with your life priorities.

Prioritizing your financial goals starts with understanding what your needs and wants are. Many people use the 50/30/20 rule when allocating their budgets: 50% for necessities, 30% for wants, and 20% for savings.

Tools and Resources to Help Define Financial Goals

Budgeting Apps and Goal-Setting Tools

Making a budget isn't easy, and it’s even harder to follow one. Luckily, technology has simplified the process through financial goal-setting tools that help us set up budgets and track expenses conveniently.

Some benefits of using tools such as budgeting apps include:

Offering more convenience and efficiency than monitoring expenses manually.
Ability to link with bank accounts and credit cards.
Ability to set limits and curb overspending.
Regularly checking your credit score.

Some popular budgeting apps include Mint and YNAB (You Need A Budget).

Working with a Financial Advisor or Money Coach

When looking to sort out your finances, both financial advisers and money coaches can be of help, although their approaches may differ:

Money Coaches deal with the basics of personal finance, like cash flow and financial goal setting, while considering your mindset.
Financial Advisers deal with high disposable income clients with existing wealth, offering tailored investment solutions that require continuous management and guidance.

How to Set Achievable Financial Goals

Using the SMART Goal Framework

Using the SMART framework provides a clear plan for accomplishing your financial goals. SMART stands for:

Specific: Target a specific aspect of your finances that needs improvement.
Measurable: Have an indicator of progress that you can measure. For example, what percentage of debt do you intend to reduce?
Achievable: Set goals that test your limits but remain attainable.
Relevant: Set goals that make sense in the context of your broader objectives.
Time-bound: Be clear on when you expect to achieve your financial goals.

Breaking Larger Goals into Manageable Steps

Breaking big financial goals into manageable steps gives you the motivation to stay the course. Follow these steps:

Clearly define the goal you want to achieve.
Identify the milestones needed to reach your goal.
Break down each milestone into smaller tasks.
List the tasks with clear timelines for accomplishment.
Track your progress and adjust when necessary.

Staying on Track Once Goals Are Defined

Creating a System for Regular Progress Reviews

An annual financial planning review provides the opportunity to evaluate and adjust your financial plan, ensuring it remains relevant and practical even when financial circumstances change.

Key benefits of a financial planning review:

Staying on track by highlighting any potential pitfalls and creating strategies to navigate them.
Managing risk by identifying threats and mitigating risks in your financial plan.
Making the most of your money by leveraging opportunities available to maximize returns.
Making informed choices by providing the factual information you need to support your financial decisions.

Adjusting Goals as Life Circumstances Change

In case there is a change in your financial circumstances, you may need to revise your spending, focusing more on your needs than wants. For example:

If you find yourself unemployed, you might decide to cut back on leisurely items and divert those funds to paying bills or building an emergency fund.
If you get a promotion and a salary increase, you may opt to apportion some of your extra income to savings and investments, or towards paying off a loan.

Need help navigating your financial journey? Whether you're looking for financial planning support or business guidance, connecting with the right advisor can make all the difference. Click here for a free consultation and find the trusted professional who can help you achieve your goals.