How to set financial goals - and achieve them

By Hardi Swart Time of article published Jan 23, 2020

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Life works better when you set goals - goals that encapsulate your core values and your ambitions. Setting goals gives life meaning and purpose and achieving those goals can lead to all sorts of things, like happiness in retirement and passing on a legacy to the next generation.

But setting goals and achieving them is much easier said than done. Many of us have a vague idea about where we want our finances to be in the future, but for some reason we never manage to get there.

Here are five tips to help:

1. Decide why your goal matters. There’s no point in setting a goal if it’s not relevant. You need to ask yourself why you’re putting yourself in this position. For example, the purpose of investing for retirement is for security and financial independence, which will allow you to enjoy your golden years and spend quality time with your children. Similarly, the purpose of keeping an emergency fund topped up is to alleviate stress in a crisis. If you clearly define the purpose of your goal, you’ll have a better chance of committing to achieving it.

2. Make sure your goals are aligned. Most goals can be split up into three categories: short, medium and long term. List your goals in each category, then make sure they’re aligned. For instance, you might have a medium-term goal of travelling overseas every year. However, if this jeopardises your long-term goal of financial independence in retirement, you’ll have to review how many times you can afford to travel.

3. Put pen to paper. The physical act of writing down your goals and describing them in detail can be incredibly powerful. It has been shown that people who record their goals are 50% more likely to achieve them. When you write things down, you store that information externally and clear your mind; your goals aren’t affected by the whims of your fluctuating mood. Type out your goals, print the page and put it on the fridge, or set it as your laptop screen saver. Even better, get a sturdy journal and use an old-fashioned pen.

There’s another benefit to writing down your goals: it has been proven time and again that the process encodes what gets stored in your long-term memory. When you write something down, you have a far greater chance of remembering that information. And if you remember, you’ll act.

4. Embrace the system. Just as writing down your goals clears space on your mental to-do list, so does establishing a systems-based approach to achieving them. Both practices effectively remove emotion from your decision-making and give you a greater chance of reaching your targets.

A great example of a system is to establish debit orders towards various funds, such as a holiday fund and an education fund. To make your system more robust, consider instructing your investment manager to automatically increase your debit order by 5% or 10% annually.

Other examples of good systems: pay off your credit card in full every month, without question; and invest at least 50% of your 13th cheque towards your retirement.

5. Use a budget as a road map. Budgeting - and reconciling the amounts spent at the end of each month - is one of the most powerful tools to ensure that you reach your financial goals. The process gives you a clear picture of what’s actually happening in your life, and what you need to change so that you can meet your objectives. Budgeting doesn’t mean you need to stop enjoying life, it just ensures that you’ll enjoy the things that matter most to you.

Another significant benefit of a budget is that it enables you to communicate with your family about how to use money for the benefit of everyone. It promotes teamwork, working towards common financial goals, and it prevents conflict about how money is spent.

Most importantly, a budget teaches family members about accountability, and about how to spend responsibly.

Happy new year!

It’s that time of the year again, when we’re pressured into creating a stack of new year’s resolutions. Instead of pretending to yourself (again) that you’ll embrace the latest dieting fad, set yourself some real goals, each with a clearly defined purpose. Then make sure your goals are aligned with each other, set up the right systems and start budgeting.

In the words of Will Robinson: “Financial fitness is not a pipe dream or a state of mind. It’s a reality if you are willing to pursue it and embrace it.”

Hardi Swart is director of Autus Private Clients and the 2019/20 Financial Planner of the Year.


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