New Year, New You: 3 steps to successful financial goal setting

One of the most common resolutions Australians make – outside of the gym or the kitchen – is to become smarter with their finances.

But “get smarter with my finances” doesn’t exactly fit the all-important “SMART” criteria for goal setting: Specific, Measurable, Achievable, Relevant, and Timely.

Improving your finances can mean a million different things for different people, depending on your priorities, lifestyle, life stage, and current levels of wealth. So how can we break it all down?

It’s actually super simple. As a financial planner, I’ll let you in on a little secret – all financial goal setting essentially requires you to answer three simple questions.

Below are the three questions to ask yourself while goal setting, for smarter finances in 2018.


1. Where am I now?

The first step is to take a quick stocktake of your financial situation, so you know what you’re working with.

Start with your assets. How much cash do you have saved up? Do you own any properties? Do you have any investments? How much super do you have? Document it all in one list.

Now check your debt levels. How much do you have on the credit cards? How much student and personal debt? Make sure to document the interest rate associated with each type of debt.

Finally, run up a quick budget that compares your general expenditure with your revenue streams, so you know exactly how much you have to play with.


2. Where do I want to be?

Next, write your three long-term financial goals.

These might be to build an extensive property portfolio, grow a successful business or become a high-level executive in your industry, to retire at age 40, or to become heavily invested in the stock market.

Knowing where you want to end up will be the driving force for all financial decision making, and thus also your goal setting.


3. How can I get from here to there?

Choosing the path towards reaching your goals is probably the trickiest part of the whole process.

At some point, you may wish to consider whether you might benefit from the help of a financial professional. But in the meantime, it’s still possible to get a great head start on your own.

Now that you’re informed about where you’re starting from and where you want to end up, this is where your goal setting begins.

If you want to build a property portfolio, as an example, your goals might focus on a stringent savings plan to build up that deposit. Aiming to pay down all your debt might require a similar approach, with consideration given to the debt that’s costing you the most. If your end game is to shoot up the corporate ladder or launch a business, on the other hand, you may see your finances drop in the short term as your goals focus on investing in the education needed to get you there in the end.

On a side note – there are a multitude of helpful educational books and blogs on building wealth across many different verticals. Every bit of self-education can help in your lifetime journey of building our finance, so another goal may be to commit to reading at least 3 different books that relate to your goals by a certain date also.

The important thing here is to follow this three-step plan – and then actually commit to the goals you create in the process!

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