You will never finish a race if there is no finish line. Likewise, you will never get to where you want in life financially if you don’t have goals to reach. Setting your goals is the first, and arguably the most critical step of the financial planning process. By putting down your goals on paper, you have established a finish line to aim for. Financial planning will establish the fastest and most efficient route to get there.
Here are four common mistakes that people make when it comes to setting their goals.
Setting goals that aren’t detailed enough
Your goals are not detailed enough. It’s not enough to say you want to live in a big house and drive a sports car. To know how much you need to achieve those dreams, you have to be as specific as you can when setting goals. What model of car do you want to drive? What kind of home are you looking to buy? And in which location? How much will these things cost? Only with this level of detail can you come up with a financial plan that is realistic and workable.
Your financial plan doesn’t change along with you
Your financial situation won’t stay the same throughout the course of your life. As you progress in your career or as your business grows, incomes and expenses are all bound to increase alongside this. You might get married and have children. All these changes will affect your financial plan. As such, your plan has to evolve with or anticipate these changing circumstances. Review your plan regularly to ensure that you are still on track to meet your goals, and make any necessary changes if you have veered off course.
Failing to stick to the plan
You may have come up with the best financial plan in the world, but if you don’t have the discipline to stick with it, then it isn’t worth anything. This is where a good financial consultant can help. A financial consultant is like a gym trainer who will help you follow a tough regime. Having someone who meets you regularly to help you stay on course is extremely important.
You’re not looking at the big picture
Many people focus on individual goals – they want to save enough money to send their child to an Ivy League university, or they want to buy a second home abroad. You may be able to achieve each of these goals in isolation based on your income, but when you put them together they may be collectively out of your reach.
So if your child’s education is your top priority, you may have to put your holiday home on hold, or consider one in a cheaper location. Or if you want to drive a luxury car, then you might have to forgo your goal of living in a landed property.
This is where a financial consultant can also help. By using a financial planning process known as Goals Mapping, a good consultant can offer you a holistic view of all your goals, and a realistic plan to achieve them all.
Most of your life goals will revolve around money, and ensuring that you have enough of it to enjoy the quality of life that you desire. By avoiding the mistakes above, you will have started on your journey to realising your goals.