3 easy steps to determine your financial goals

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What do you want to get out life? How do you see yourself years from now? Who are the people who mean most to you and what can you do to spend quality time with them? In financial planning, these are important questions that must be at the heart of everything that you do in your life.

After you knowing your current financial status, the next stage of financial planning is knowing your goals. A financial goal is anything that means something to you, has cost, and has a target date. This is a part of the series of articles on, and if you want to read the introduction please consider reading the post on the importance of having a financial plan?

Defining your goals in life

We Pinoys think that goals are way larger than our life, and that’s why we don’t think we ‘deserve’ to even have them or much more to record them. Alternatively, we think that it’s enough to carry them around at the back our minds, fearing that we will invite raised eyebrows from other people for even daring to dream.

But to dream is free. And those who give their dreams more focus and attention are in better position in fulfilling them than those who don’t.

Why goals are important to financial planning

Your goals guide your financial plan and actually your life. Every decision that you make is going to be determined by whether it brings you closer to achieving what you dream of. From organizing your expenses, saving a bit from your income to buying assets, you will always go back to what you want in the first place.

They must be something that make you become the person that you are meant to be. For instance, your life’s dream might be to be the best parent to your children, and that is something that you cannot put a price tag on. However, the things that you need to achieve that dream such as preparing for their education, having adequate healthcare cover, etc., are things that have costs. And these are the financial goals that are to be defined.

If you don’t verbalize your dream or you don’t have a list of definite plans yet, you are more likely to commit costly mistakes. You will have less reasons to take control of your budget. You are less motivated to set aside savings from what you earn. And you are more prone to be enticed and to fall prey to get-rich-quick schemes, fly-by-night networking companies and scams. Other benefits include:

  • Provide motivation to do financial planning. There’s a reason why you are taking steps in getting back control of your finances.
  • Inspire you to work hard. Without them, you would are subject to quick burn-out.
  • Build discipline. Because you are saving up for a your life’s dreams, you will find ways to ensure that your daily living is organized toward fulfilling them. This would include putting a budget in place, determining the amount of savings and making sure that you have adequate income.

Important reasons why you should write down your goals

Is there any difference between just imagining what you want to pursue and actually writing them down? It turns out, yes. Those who write their goals are more likely to succeed in achieving them. According to Dominican University of California psychology professor Dr. Gail Matthews, those who write down their goals and tell a friend of the updates have a higher chance of being able to fulfill them.

So here are the three easy steps in coming up with your own personal future financial goals.

A goal means something to you

A goal must have a purpose that means something to you. It should bring you closer to be fully self-actualized, helping you become the best version of yourself.

Don’t worry if you are still figuring out what kind of person you are destined to become. Everyone is. And it is also not an easy question to answer. What is more important is that every time that you set out a goal, you should find the time to check if it is in line with what you want to happen in your life in both your present and foreseeable future situations.

Any purposeful goal can be broken down to three things:

  • what you want to do
  • what you don’t want to do
  • what you want to buy

What you want to do

The first type of goal is anything that you like doing. Your list might include:

  1. Start doing a business
  2. Retire early
  3. Self-publish a book
  4. Have enough money to send yourself to school
  5. Have enough money to send your children to college
  6. Have enough money to do home repairs
  7. Have a holiday every year
  8. Attend a concert of a favorite band or musical act
  9. Watch live theatrical performance
  10. Repay loans
  11. Pay home loan (from Pag-ibig)
  12. Pay for child-support

What you don’t want to do

The second type of goal is anything that you don’t like doing:

  1. You don’t want to be penniless in emergency situations.
  2. You don’t want to rely on your family when you lose your job.
  3. You don’t want to rely on your family when you are ill or permanently disabled.
  4. You don’t want to leave your family behind poor and/or in debt.
  5. You don’t want to be working for the rest of your active life.

What you want to buy

The last type of goal is one that we are all familiar of. These are things that you want to acquire, and this might include:

  1. A house
  2. A vehicle
  3. Want to own and run a food business
  4. Investment property to earn additional income
  5. Acquire collectibles, artworks
  6. Buy jewelry, high fashion / haute couture
  7. Gadgets, home entertainment system
  8. Laptop, computer
  9. Camera

A goal has cost

A financial goal must have a cost. This explains why gaining friends is not a financial goal, because friendship should be freely given, received, and shared. So is a loving relationship with a spouse or with your children, etc. However, throwing a dinner party or going on a vacation with friends is a goal. And so is going to cinemas to catch a premiere showing of a long-anticipated sequel with your family.

So how is cost determined? This is where it is going to get tricky. The goals that can be met right away are the easiest to estimate. All you have to do is to go window-shopping, go online and search for price tag of similar items.

The same cannot be said of those that are going to occur later. The further a goal is set in the future, the harder it is to estimate its cost. Having said that, don’t worry if you don’t have the exact figure. Attempt to come up with the closest approximate. It is fine that you take many assumptions about your future needs, such as the changes in lifestyle like having a family, rate of taxes, inflation, your job, etc.

A goal’s cost is its first test of how realistic and achievable it is. If it is too expensive that you need to sell a leg and an arm, you might need to step back and calculate if it is something worth having.

How much a goal cost is also a factor when you are going to the next stage of financial planning, which is developing a plan. It pushes you take a look at the many, at times competing, goals that you have defined and prioritize them in terms of how much they cost. You can then think of a way of achieving them either all at once or per item, depending on your ability to pay.

A goal is time-bound

A financial goal is tied with time. And it is always set in the future. It is a snapshot of you at a later time. It can be something that you want to happen in a matter of weeks or months. Or you might need to wait for years before you are able to do, afford not to do, or buy something.

Always remember that if a financial goal is not set to happen some time in the future, it is wishful thinking. It remains to be just a dream, imaginary and unrealizable.

Time is the second test of how achievable your goal is. If it takes you a thousand years to be a billionaire, you might need to be more realistic with your aspirations. Interestingly, you might challenge yourself to become one in your lifetime by launching a successful tech start-up or be an astute investor.

So take the time to prioritize your goals according to the length of time it takes you to achieve them, such as:

  • Short-term. A short-term goal is anything that takes you three to six-months to achieve.
  • Medium-term. A medium-term goal is anything that takes you half a year to around three years.
  • Long-term. A long-term goal is anything that takes longer than three years.

No one can see the future with certainty. Just like cost, it is fine that you make assumptions.

Financial goal worksheet

You can use the Financial Goals Worksheet. This worksheet is an easy-to-use, Excel-based file that you can download. Just fill it out, and it automatically gives you calculation on how much you need to save annually.

Being clear about the things that you want to buy and do is just the first step, but a crucial one. You would then need to do something so that they will not remain to be dreams, and instead will become a reality.

  • Be realistic. While dreaming is free and without limits, it is best to think of the ones that you can realistically fulfill.
  • If the worksheet turns out that your dreams are costly, and that it will take you a long time to achieve them, you can do either one of two things. One, you can manage your cashflow by increasing your income and/or decreasing your lifestyle. Two, you can reduce the size of your goal, or remove it from the list which I don’t recommend unless you really have to.
  • Talk with your spouse. Communicate with your wife/husband about the goals, especially when they have something to do with your family’s well-being such as purchasing a house, booking for trips abroad and acquiring properties.
  • Look for a buddy. Working out what you want in life is best shared with someone who can keep tabs on you. S/He can also encourage you to continue working on your dreams.

Bringing all of the above, what you can come up would be a table that list down your financial goals, the estimated amount to acquire them, and the length of time. See below the table for example.

GoalsYearsCostAnnual savings
Retirement305,000,000 166,667
House103,000,000 300,000
Child’s education181,000,000 55,556
Vehicle4750,000 187,500
Business capital3150,000 50,000
Vacation2100,000 50,000
Total10,000,000 809,722

As you can see from the table, there are four things that are involved when you drawing up a list of goals that you want to attain in your life. Aside from your dreams, you should at least estimate as well the cost and the timeline that you want to achieve them. The last column shows the annual savings, which is obtained by dividing the cost by the number of years. This is the amount of money that your goals require you to save.

Next steps

Once you have determined your goals, it is time to develop a financial plan. This is where you will analyze how your current financial status will meet your goals.

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