How Goal-Setting Helps You Plan Your Finances
If there’s one rule we believe in in life, it’s that it’s always easier to plan your route when you know what the destination is. Otherwise it’s a bit like getting in the car and not knowing where you’re going. You can drive around a lot, but you’ll never end up where you need to be. The same principle applies to financial planning. If you know what your life goals are in the beginning, then you can easily create a separate financial plan to achieve every one of them, and an overall plan to tie it altogether. Individuals with clearly defined goals are also much more likely to achieve them, so it’s a win all round really. But how do you set goals, and what should you be planning for?
How to Set Goals
Good goal setting starts with asking yourself what it is you want from your life, or your business. It’s important to consider both the short and the long term here, as this will impact what kind of planning you need to do. For example, you might want to save for a holiday, or a new sofa set in the next 12 months, which would be a short-term goal. You may also want to buy a home someday, which means you will need to put money away for that over a 3-5 year period, making it a medium-term goal. And for the longer term, you may want to create a savings pot to support your child through higher education, or to fund your own retirement. Whatever your goals are, they need to be well-defined, not woolly or too generalised. This means setting the result, a financial figure to achieve it and a timeframe you want to achieve it in. This will ultimately help you choose the right financial tools to achieve your goals, as well as linking certain financial products together to boost success.
Challenges You May Face
No process happens without challenges, including trying to set your own goals. The biggest one you’re likely to come across is procrastination. With changes in circumstances and the day to day uncertainty of life, you may end up putting off your goal setting, which only delays your progress. It also means you would lose out on certain benefits like compounding, you could end up under or over saving, or your resources could be used efficiently, all of which would set you back when you do eventually set your goals and financial plan.
The other main challenge is the common practice of ‘sacrificing today for a better tomorrow’. For example, starting with a small amount of savings can create a sizeable amount of wealth over time. But unless your goals are well-defined, strategies like investing might not be much help. You could also find yourself setting unrealistic goals, expecting unrealistic returns on investments, or looking for quick-fix financial solutions instead of creating a long-term strategy. Luckily, all of these pitfalls can be easily avoided by working with a financial planner at every step.
Once you have established what your goals are, you will need a roadmap to get there. One of the most prominent things to feature in most plans is life insurance. This is a key risk management tool that provides for more long-term financial goals. Life insurance helps to mitigate the risk of not meeting your long-term goals, like the needs of children and grandchildren. For example, if your goal is to provide for your children, then you would direct at least some part of your savings into life insurance to provide for them. You may have a specific amount you want to save ready for when your child is a certain age, such as a house deposit or university fund. If you were to pass away before you reached that goal with your other savings efforts, then your life insurance plays its part in securing the financial future of the child by contributing up to, including or over that amount. By setting goals for both life and finances, you can help safeguard your family against any financial crisis, including death and disability, ensuring you can still support your financial dependants in the way you want.
At Chilvester Financial, we work closely with individuals and business owners to help them take control of their lives through effective financial planning. A big part of our planning process is to understand your goals, and to help you define them clearly. Once we have done this, we can evaluate your unique circumstances and create a tailored financial roadmap to get you there. If you would like to know more, just get in touch with the team today to book your free, no obligation consultation.