Setting goals is just the first step in order for a disciplined plan that will secure your financial future. If you do not want to leave anything to chance, then you need to be aware of the big and small errors and controls that can affect your goals. Here are three errors to avoid when setting goals to give yourself the best chance to achieve your goals.
- Link financial objectives to each other:
Your goals must be a key factor in all financial decisions you make. For example, the success of your retirement goal is tied to how well you can save some money and save it from your current income to invest in the future and secure your bank account.You should also see each goal in conjunction with other goals you might have. In addition to prioritizing objectives so that the focus is on the objectives that are important and necessary first.
If building a fund for critical situations to cover six months of income and emergencies is a goal, you may have to shorten the budget for other near-term goals so that your savings can be used better to meet the most important goal.
The goals you specify must be feasible considering the level of household income and savings. For example, early retirement may not be a practical goal for a single income family with several individuals.
- Not aligning targets with investments:
Disconnecting from the goal of a particular financial process because of the accumulation of other goals to meet it is another recurring mistake made by people. The investment options you choose to collect required funds must be consistent with the planned goal features.You can put a near term target at risk if, for example, you direct your savings into equity markets for higher returns but unfortunately your savings may lose value because of a sudden drop in the market. Similarly, long-term debt may linger on you to suffer from a lack of funding for your project that you have planned if you ignore the time horizon available to enter some risk to achieve better returns.
Instead, you can invest your savings in low-risk fixed-income projects. Other investment features that must be aligned with the objective include the ability to generate income, liquidity, the ability to make periodic investments and others.
- When specific objectives are not specified:
Just pointing to the need to set goals to work on them is unlikely to give the results you seek. For example, if your goal is to collect the home premium within five years but you fail to determine the amount you need, you will not have a goal to work for.It also allows you to review goals by measuring your progress and taking immediate corrective action if you are short of work before it is too late. This is particularly important for long-term goals of great value, as they tend to give preference to immediate goals in the hope that they can catch up later.
Divide large, long-term goals into short-term goals to facilitate measurement of progress and make it seem less difficult and achievable. When you achieve all short-term goals, they will motivate you to continue and continue to work hard.
Similarly, "I want to retire early" is unlikely to take you to your goal because you leave it open and devoid of features and characteristics. But "I want to retire at the age of 50" gives you a deadline.