How to set financial goals that you can actually reach

The 5 steps you’re going to read here are straight from our Client Success Lead,  Andiswa Mojapelo who spoke all about this in detail in our latest webinar. That webinar is packed full of brilliant advice and detailed information and best of all, it’s FREE. You can watch it right here.

Let’s do this!

Step 1: Goal reflection

History nerds will tell you that studying the past is important because that’s the first step to understanding where we are going - to understand what our future looks like.

It’s the same with your finances.

In order to set realistic, achievable financial goals, the best way to start is by reflecting on how things went last year. 

Write down all of the goals that you achieved, and also write down the goals you didn’t achieve. 

Think about the goals you achieved and what the reasons were that you successfully reached them. Was it perhaps time, affordability, or some extra income? Write those reasons down.

Next, it’s time to get super honest with yourself because now you need to identify why you didn’t reach your unachieved goals. What were the barriers that prevented you from achieving them? What got in the way? Write it down. And be kind to yourself, none of us are perfect, but acknowledging where you’ve gone wrong, is a step in the right direction.

This is also a good time to think about your money strengths and weaknesses. What are you good at, and what are your challenges? It’s important that you understand what those are so you can start to work on and conquer them.

Step 2: Find the 'Why' behind your money

Whenever any of us set any kind of goal, there’s a reason we’re setting that goal. For example, if we set a goal to run 10km, the ‘Why’ behind that goal might be because we want to get fit and strong. Or just because we want to fit into that expensive pair of jeans again. 

Well, in Step 2, you need to identify what the thing is that motivates you to reach your financial goals. What’s the reason you’re doing all of this in the first place? Perhaps you’re trying to save to buy a house or another asset. Or maybe you have a long-term goal of financial freedom. Whatever the reason is, you have to establish what it is and write it down. 

Step 3: Setting your goals

Alright, the psych stuff is done and now you can dive into the fun stuff: Setting this year’s goals!

Before you get too carried away, remember what we said earlier: We want to make sure that you’re setting goals here that you can actually achieve. So to help you with that, here at Velocity Club we use the system known as S.M.A.R.T. 

Some of you may have heard of or seen this one before but for those who haven’t yet, it’s an acronym for the words Specific, Measurable, Attainable, Realistic and Time. 

In summary, the S.M.A.R.T system is a great guide for setting goals that are achievable and whose progress can be easily tracked. There’s a bit more to it though:

S = Specific

Any goal you set must be specific. In other words, for the sake of our exercise, you wouldn’t set ‘Buy a house’ as your goal. That’s too vague. In order to make it Specific, we want to set a number to it. So instead of ‘Buy a house’ you might want to say something like, ‘Save up R100 000 for the deposit on a house’. By putting an actual number to the goal, we’ve made it specific.

M = Measurable

According to Andiswa, “Understanding the measurement of your goal will help you break down how much you must actually save to get where you need to be. It allows you to track progress.” For your financial goal to be measurable, you would for example have to calculate how much money you need to practically save towards that goal. 

A = Attainable

Your goals must be achievable or realistically within your reach. There’s no point in deciding that your goal is to save R10 000 per month when your salary is R15 000 per month. That’s just not attainable. So when you set your goals, it must include numbers that are attainable within the context of your current circumstances. But don’t let that stop you from working towards your financial dreams, as Andiswa confirmed: “Understand and accept your current situation, but work towards more.”

R = Realistic and relevant

“You can dream, it’s allowed,” said Andiswa. “But the goals you set must be attainable so that you don’t demotivate yourself and leave you feeling like you’re not achieving your goals.” 

Remember, our objective here is to help you reach your goals, to reach for your dreams. But we can’t do that if you’re constantly setting goals that are completely unrealistic. That’s just setting yourself up for failure.