Step by Step Guide To Setting and Achieving Your 2020 Financial Goals
It feels like yesterday when we were screaming “Happy New Yearrr” and “Welcome to 2020!!”, suddenly we’re in March — the 3rd month of the year and the end of the 1st quarter (scary stuff). If you’re anything like me, you’re probably wondering to yourself, “where exactly is 2020 running to???” However, as much as it would be easier to go around lamenting about how fast the year is moving, the smarter thing to do would be to devise a realistic plan to help you achieve all those big financial goals you’ve set for yourself.
A common feature of the beginning of a new month is “Personal Introspection”, this is a period where people would take out time to review how the previous month went and ask questions such as: “what did I achieve this month?”, “How close am I to achieving my 2020 financial goals?”, “what actions or habits can I pick up to help me do better in the new month?” Engaging in this short exercise aka “goal review session” helps to give you perspective on how you’re doing (or not doing) with your goals, hence, it is perfectly normal to feel bad post the review session when you realize that you’re not anywhere close to achieving your 1st quarter goals.
If this sounds like you, first, Chill off!! January is typically a slow month as most of the work doesn’t start until February, so don’t beat yourself up too much.
Hopefully, that made you feel a little bit better. Now let’s move on to practical reasons that could be responsible for why you’re not achieving your financial goals as planned.
In order to achieve anything worthwhile, you must set SMART goals
In this article, I would be talking about a goal-setting technique called “SMART”, using this framework would help you get clarity on all the steps you should be taking per time, to achieve your financial goals
The SMART goal setting technique stands for Specific, Measurable, Achievable, Realistic and Time-Bound.
“I am going to be richer than Jeff Bezos one day”, does this statement sound familiar to you? You must have heard some aunties and uncles say this loudly to anyone who cares to listen. While this goal sounds exciting, it is not SMART and therefore has a 99.9% chance of being unachievable. Here’s why:
- Your financial goals must be very Specific:
What exactly does “being rich” mean? Which amount qualifies as “rich” to this person? A better way of framing this goal is to say: “I aim to have a net worth of 1 billion USD”. When setting financial goals, you must know what your big financial picture is, ask yourself, “how much do I need to have in assets to fund the type of life I desire?” Then make it as specific as possible.
- Set Measurable goals:
Now that we know that your target is 1 billion USD, how do you want to attain this? Do you want to carry out one transaction that gives you 1 billion USD at once (highly impossible by the way), or you want to accumulate the money over time by saving and investing small amounts regularly? When you divide your financial goal into months/quarters, it becomes easier to measure progress.
- Are your goals Achievable?
What is the plan to achieve your financial goal? You need to create a plan around budgeting, cutting down unnecessary expenses, increasing your income exponentially, regularly saving as much of your income as possible, investing your savings in assets that would generate high returns for you, and allowing compound interest work its magic over time.
- How Realistic are your goals?
For instance, a 50-year-old human with most of their earning power behind them, how realistic is it for them to accumulate a net worth of 1 billion USD from a current net worth of 100,000 Naira? When setting financial goals, there is a need to consider all other life factors that can hinder the achievement of your goal.
Is there a timeline to your goal? So you want to have a net worth of 1 billion USD, impressive! But in what time frame do you plan to hit that amount? 20 years from now? 30 years?
Finally, if we are to rephrase our initial goal using the SMART framework, it would look like this: “In the next 30 years, I am going to acquire relevant skills that would increase my income exponentially, I would keep my costs low and invest x amount of money monthly in high return yielding assets, so as to have a net worth of 1 billion USD when I turn 50”
So here’s a question for you, we are 3 months into 2020, what kinda goals are you setting for the year?