Turning Financial dreams into actionable plans
If you were to ask people about their financial goals, a small number will have clearly defined goals, about half will have a broad idea, with the rest having no real financial goals at all.
My experience is that many of these broad financial aspirations fall over as they remain abstract and vague. The amount of times I’ve heard people say things like, “I’m going to be better with my money”, or, “I’m going to get ahead financially”. Although these goals make sense, they amount to not much more than rhetoric; they don’t aim to achieve anything specific, nor do they have an end point.
Many of you may have heard of SMART goals (Specific, Measurable, Achievable, Realistic and Timely), and these SMART goals are also the most effective blueprint to financial success.
The core of Financial Planning is assisting a client develop goals and set an action plan to achieve these goals. All the technical and strategic tools we use are nothing more than ways to assist the client to efficiently achieve these goals.
The identifying of goals is, any many ways, the most interesting part of the job, and achieving a client’s goal is the most rewarding. We normally break down the goals into short and long-term, as well as broad and specific, creating 4 quadrants for the goals to sit. A specific goal might be something like, save $40,000 for a deposit for a house over the next 5 years, or, a more immediate goal of, pay off my credit card or save for an overseas holiday over the next 6 months. A broad goal might be something like save $5,000 per year to build wealth for the long term.
Specific goals with time-frames make it far easier to develop action plans that are designed to bring these goals to fruition. The example above, saving for the house deposit, forgetting investment returns, if we save $8,000 a year for the next 5 years, we will have sufficient funds to achieve this goal. This saving equates to $160 a week; we simply identify where this money can be saved or redirected and allocate the money to the specific “deposit” goal. Once we have put this savings plan into place, we can then track the progress and work towards achieving this goal.
In the case above the strategy is simple, but the success is driven by identifying what the client wants to achieve and putting steps in place to achieve it.
The next step is to look at those New Year resolutions, turn them into SMART goals and then put a plan in place to achieve them !