What are Financial Goals?

What are Financial Goals?

We all have financial goals, whether we know it or not. It is really important to have well thought out and appropriate goals if you want to achieve financial success. It’s even better if those goals are documented in your financial plan.

My definition of Financial Goals is really very simple. Financial Goals are simply goals that you want to achieve that will require money, or specific goals about your money. Let’s have a look at both of these, starting with the later first.

Some people have goals that are specifically about money. Some examples of these are:
– I would like to save $50,000,
– I would like to increase my earnings by $25,000
– I would like to reduce my mortgage by $200,000,

While these are all good goals and potentially worthwhile pursuing, they are missing two VERY important components. The WHY and the WHEN. A goal is much more powerful when we have a clear reason for achieving it, and a deadline. A goal without a deadline is just a dream or a wish.

So we could expand on the above goals, adding the why and the when.
– I would like to save $50,000 as a deposit to buy our first home, in 18months time.
– I would like to increase my earnings by $25,000, in the next 2 years, so my partner can stop work to raise our family.
– I would like to reduce my mortgage by $200,000 in the next 5 years, so we can use the payments towards building a retirement nestegg.

These goals have much more power, but they are still about money. The other type of financial goal starts with a lifestyle goal and then the financial requirement (or strategy) is worked out. These are even more powerful, because they are about what we actually want (the end goal), rather than how we think we might get there (the means goal).

It is important to focus on the end goal rather than the means goal, as there may be more than one way (means) to get there. You can think of a means goal as a strategy to achieve our end goal.

Focusing on the means (strategy), before we define the end goal is a bit like focusing on the prescription or medicine, before we focus on the diagnosis or they problem. Unfortunately, this is what many of us do when it comes to money.

As an example we might have a means goal like:
– I would like to buy a negatively geared investment property.

If we delve a little deeper and ask WHY, we will discover the end goal or goals. In this case, the end goals might be, I would like to save tax and build wealth for retirement, with the building wealth for retirement being the most important part.

Buying a negatively geared investment property might be a perfectly good strategy for some people to achieve this goal. However, it might be a terrible strategy for someone else to achieve the same goal.

Good Financial Planning is always about:
– Getting a clear picture of your current financial situation (where you are right now)
– Getting a clear picture of your goals (where you want to get to)
– Formulating strategies to achieve those goals
– Taking ACTION to put the strategies in place.
– Regularly reviewing the above 4 steps.

So as the late great Steven Covey said in his classic book “The Seven Habits of Highly Effective People”…. begin with the end in mind.

So when it comes to money what do you want your future to look like.

A good financial planner can help you:
– work out your financial goals
– come up with a plan to achieve those goals
– formulate the strategies (and actions) you need to put in place.
– hold you accountable to do what you need to do
– regularly review your progress towards those goals in light of the inevitable changes to your circumstances and/or goals, changes in market conditions and changes in legislation.

WARNING : All of the information in these posts are provided for general purposes only. That means they do not take into account your specific circumstances. They are designed to improve your knowledge in all areas of your financial world. Before you act on any information in these posts, you should get good advice that is specific to your own circumstances and goals. If you would like help in any of these areas, please free to contact us for a free 15 minute phone consultation to determine if we can help you.

2 responses to “What are Financial Goals?”

  1. Chris and Michelle Parker says:

    Fully agree and is a text book example of why and how we have been working with Rob and the team over the years. We are now very close to achieving our goals because of Rob’s support in defining our strategy and helping to keep us on track.

    • Rob McGregor says:

      Thanks Chris and Michelle, we are really pleased to have been able to assist you in achieving your goals and we look forward to continuing our relationship long into the future.


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