Practical Guide to Achieving Financial Goals
Setting Financial goals is one of the most important steps towards wealth creation. To live a happy life, you have to set goals on the different facets of life depending on your priorities at the time. The ikigia model demonstrates this best. Below are the facets I think are important, the priority changes depending on the situation and time of my life.
- Financial goals
- Health and fitness goal
- Parenting Goal
- Relationship goal (family and friends)
- Business and career goal
- Spiritual goal
The financial goal has ranked highest most of the time. If we achieve the financial goal, then we will achieve all other goals easier.
For example, with money, you can join gyms to improve your fitness. You can go on nice dinners and spend time with family, You can grow your business or career by learning more and investing in yourself. You can take children to good schools and spend vacations with them in exotic places. With all this, you will have more to donate and be more at peace spiritually.
To achieve your financial goal, you have to group them in two.
- Short term goals
- Long term goals
should be achieved within the next 5 years. most of the time the goal builds on the long-term goals. You should be able to break it down to the activity you can do today, this week, or this month to achieve it with your current resources.
Below is a guide to achieving your short-term financial goals
- Earning Money. You have to start from somewhere and the 1st step is getting an income even if it is small.
- Starts forming good financial habits: How you manage your money makes the difference in achieving your financial goal. That because you need to have money to save and invest. You can only achieve this by having good financial habits like
- Monitor expenses this will help you know what you do with your money. You will identify the areas where you can reduce your expenses and save money to release it for investment. there are several expense trackers you can download on your phone to assist with the exercise.
- Budgeting: A budget lets you decide what to do with your money. If you don’t budget your money, then your money will decide on where to go and you’ll never know what happened to it.
- Live a frugal life: You should spend less than you earn. Do not live beyond your means. you can be creative in reducing your expenses without denaying yourself. For example, you can take advantage of free wifi and save yours on your phone date expenses.
- Save: The rule of thumb is to save 10% of your income. Your wealth is not determined by how much you earn, but by how much you save. When you save you will be able to plan your big expenses better and have money to invest.
- Invest: This is a habit that wealthy people take seriously and poor people don’t know. You can achieve your financial goals better if you can grow the money you already have. If you can figure out how to make money work for you, you will have passive income and you’ll be on your way to becoming wealthy and financially independent. Rich Dad Poor Dad. However, it also depends on what you invest in. Make sure you are investing in assets and not liabilities and make your money work for you so you don’t have to work for money. Robert Kiyosaki explains these aspects very well in his book
- Build an emergency fund. This should be money put aside in case of unforeseen events. Usually, most unforeseen events require money and they are unplanned. An emergency fund should always be equal to or more than 6 months of your current expenses. That is if your monthly expenses are about Kes. 100,000 per month then you should have KES 600,000 in case you lost your current job/ business you can survive without changing your lifestyle for 6 months.
- Pay off Bad Debts: Sometimes we take loans to buy liabilities like cars and homes. To achieve the financial goals you need to only have good debt. Also, the longer you pay a loan the more interest you pay, therefore it is advised that you should try and pay off your loan early to reduce your interest. I will start by paying lump sums to the bank for the loan so that I can reduce the loan tenure.
Long term Goals
Long-term goals can be intimidating to you now. However with the foundation of the short-term goals and breaking down the goals into small achievable goals then you achieve your long-term goals easily.
You can plan to meet the long-term goal in 5 to 20 years and even beyond.
To ensure you don’t fall short of your goals you need to calculate the present value of the goals in the future factoring in inflation. That means if it cost 1 million to buy a vehicle now, it will probably cost 2 Million in 5 years so you plan to have the 2 million in the future when you intend to achieve your goal.
examples of Long term goals are
- Plan for Child Future: This is one of the goals that is also related to the Parenting goal. Once you have children you have to plan for their future. That means you plan for some of the events that you provide as a parent like higher education and wedding day depending on your culture. If you would like to secure a good future for your children, invest in their education and teach them about life.
- Buying/ building a home in a gated community that has facilities around like good schools, malls, and clubs. This is a common goal.
- Traveling the world, this a dream many have. To travel the world when they retire.
- Upgrade vehicle: to your preferred model of dream Car.
- Join executive clubs like Wadi degla or Muthaiga golf club
- Retirement pension fund sufficient to keep us in the same lifestyle for the next 40 years.
Other than the short-term and long-term goals you have to plan for the irregular expenses. These are not monthly expenses but are expected expenses like
- Currently school fees and short courses
- Insurance for life, motor, and medical
- Car services
- Planned family functions
- Family local vacations
In Conclusion on Financial Goals
If you have a plan for your money it will serve you better, if you don’t you will be its slave. The goals that a person chooses can be achieved if you invest your money to grow and have it to meet your goals.
Are you wondering how you can get a step-by-step financial plan that will guarantee you meet your financial goals? Check out the Financial plan.