Why & How to Set Financial Goals

Why & How to Set Financial Goals

Setting financial goals is an important step in achieving financial security and stability. This new year we’ve had a lot of new goals set in the app. However, now that payday is here and quitters day has passed you should be able to gauge just how committed you are to those goals. If you’ve already given up on your goal maybe it’s time to reassess and start over. This time will be different though because you’ll set a SMART goal (more on this later).

Why setting financial goals helps you.

The main reason why setting financial goals is important is that it will help you prioritise your spending and saving. When you have clear financial goals, you are more likely to make conscious spending decisions that align with those goals. For example, if your goal is to save for a deposit for a house, then you may think twice about taking a vacation and instead put that money towards your savings. Setting and sticking to your budget gets a whole lot easier when you know what your priorities are.

Setting financial goals will also help reduce your stress and anxiety around money. If you have a clear plan for your finances, you’ll be less likely to worry about whether or not you will be able to pay rent or have enough to retire. The answer will be made very clear in your planning.

If your priorities aren’t in check or you have financial stress, then these goals will also serve as motivation to help you take action. That’s because having a clear goal in mind makes you more likely to take the necessary steps to achieve it. For example, if your goal is to pay off credit card debt, then you may choose to increase your income by getting a part-time job or starting a side hustle.

What Are SMART Goals?

SMART financial goals are Specific, Measurable, Attainable, Relevant, and Time-bound. This framework helps you structure your goals in a way that is more likely to lead to success. Non-SMART goals are often too general and lack specific details and a sense of urgency which may lead to procrastination and a lack of motivation. With SMART goals, you have a clear roadmap to follow and can adjust your plan as necessary to stay on track.

To set SMART financial goals, follow these steps:

1. Identify what you want to achieve financially: Is it an emergency fund or buying a new car? Here is what other Franc investors are saving for.

2. Make sure your goal is specific and clearly defined. For example, if you want to save towards a car make sure you know which car it is. This will make a big difference to how much you need to save.

3. Determine how you will measure progress towards your goal. We will do this for you on the Franc app as your progress is updated daily and you will be able to check at any time.

4. Ensure your goal is attainable and realistic. This is where that budget comes in. Can you afford to put away R1000 a month for your next vacation and still pay all of your bills without going into debt?

5. Give yourself a deadline for achieving your goal. It will help create a sense of urgency for yourself.

With these 5 aspects in place, you will be able to regularly review your progress and adjust your plan if necessary.

There you have it, setting financial goals helps you prioritise spending, reduce your money-related anxiety and find the motivation to improve your financial situation. Once those are in place you will be able to set SMART goals to take control of your finances and work towards a better financial future. Is your Franc goal a SMART goal?

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Tara Williams

Tara is a marketing professional who is passionate about branding and communication. She is a green tea addict that loves to find ways to be creative in her free time.

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