Feels like yesterday when we were screaming “Happy New Yearrr” and “Welcome to 2022!!”, suddenly we’re halfway through January (scary stuff). If you’re anything like me, you’re probably wondering to yourself, where exactly is 2022 running to??? However, as much as it would be easier to go around lamenting about how fast (or slow) 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 year is “Introspection”, this is a period where people would take out time to review how the previous year went and ask questions such as: “what did I achieve last year?”, “what actions or habits can I pick up to help me do better this year?” 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.
Post the review session, if you discover that you’re lagging behind on your goals, worry not, the new year is an opportunity to do better. But first you need to figure out why you’re not achieving your set financial goals (cue in setting your goals the SMART way).
In order to achieve anything worthwhile, you must set SMART goals
The SMART goal-setting technique is a framework that can help you get clarity on all the steps you need to be taking per time, to achieve your financial goals.
SMART stands for Specific, Measurable, Achievable, Realistic and Time-Bound.
Ever heard an over-zealous aunty or uncle say this to anyone who cares to hear: “I am going to be richer than Jeff Bezos one day!!”? Sounds familiar? While this goal sounds exciting and audacious, it is not SMART and therefore has a 99.9% chance of not being achieved. 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”. 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, how do you want to attain this? Do you want to carry out one transaction that gives you $1 billion 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, consider 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 from a current net worth of 100,000 Naira? The odds are not really in their favour. So when setting financial goals, there is a need to consider all other life factors that can hinder the achievement of your goal.
- TimeBound!
Is there a timeline to your goal? You want to have a net worth of $1 billion, impressive! But in what time frame do you plan to hit that amount? 20 years from now? 30 years? You always need to have a timeline for your goals.
To wrap up, 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 living costs low and invest x amount of money monthly in high return yielding assets, I would re-invest continously and take advantage of compound interest, so as to have a net worth of $1 billion USD when I turn 50”
And that my friends, is a goal that just might get achieved! So here’s a question for you, we are 19 days into 2022, are your 2022 financial goals SMART enough??
This article was originally written for Paga