Setting Financial Goals

Many people have quite vague goals for their future, a good car, a nice house, some overseas travel and so on, but often don’t spend too much time thinking about how they are going to achieve their goals. To be achieved, goals should be:

Specific: Rather than saying ‘I want a car when I turn 18’, be specific about the make and model. Collect all the information you need and write down the reasons why you want that particular car. Specific goals help us to keep us motivated and on track.

Realistic: You may want your first car to be a Ferrari, but that’s unlikely to happen for most people. Goals should be realistic and achievable.

Time framed: Saying ‘One day I want to travel overseas’ is not as useful as saying ‘I will work full-time for two years, save $10 000 and spend 6 months backpacking around Europe’. A concrete time frame will help you organise your money so that you will have saved the $10 000 by the time you need it.

By writing down our goals it is much more likely we will achieve them.

Short and long term goals

It is best to have a mix of short term and long term goals and recognise that choices have to be made at times between our goals.

Short term goals are much more easily achievable and give us the confidence to achieve the longer term ones. A short term goal could be saving $10 a week for three weeks to buy a DVD or CD.

A longer term goal might be saving $20 a week for a year to pay for a  holiday at the end of Year 12.

Generally, short term goals are less than a year, and long term is anything longer.

We can also have different financial goals for different times in our lives. For example 15 to 17, 18 to 21, 22 to 28

Mind Mapping

Preparing a concept map or mind map outlining our financial goals for each stage of our lives is a useful process. A mind map can be prepared on paper or online. There are some excellent free online mind mapping tools. One that I use is Mindmeister. The attached mind map was prepared using Mindmeister and is for a person in the 18 to 21 age group.

The content of this post is based on information from Consumer Affairs Victoria.