When a financial planner asks you what your financial goals are, you know the answers; get rid of debt, pay off the mortgage, save for retirement. But these aren’t your actual goals.
If you have ever sat down and planned out your finances, you’ll have some maths going on. You want to pay off your mortgage in X years, get rid of that car loan, and pay off your student loan. You want a certain amount in KiwiSaver as well as $X saved in your retirement fund.
There. Your goals, planned.
But these are not really your financial goals. They are simply methods to get to your true goals.
What isn’t a financial goal?
So many finance blogs and advisors give examples of goals that are not goals. Some may sound really familiar to you.
- Paying off debt: Reducing a mortgage, a student loan or other interest-accruing money suckers
- Saving more: Having a good emergency fund, retirement savings
- Developing alternative income: Buying rental properties, investing in the stock market, and creating multiple income streams
- Making more money: Getting a side hustle, working another job, getting a better paying job
- Saving money: Making a budget, cutting out expensive habits like smoking, tracking spending
None of these are goals. These are all either obstacles that get in the way of your goals (such as debt), or a way of overcoming these obstacles. Your 18-year-old self did not wake up one day with a burning desire to save money or start investing in Bitcoin. Goals are something that is quite different.
What are actual financial goals?
Everyone is different. We each have a different ‘raison d’être’, or thing that gets us out of bed each morning.
Your financial goals will depend on what you want; while some of us desire the financial freedom to travel for six months at a time, others want to buy that classic car they have always dreamed of. Or it might be to spend fishing season pottering around the Southern Lakes catching trout or salmon, or getting the latest Louis Vuitton handbag and having languorous lunches with wine and caviar. Some of us just want a life where we don’t have to worry about bills, or where we can retire when we want to.
For your retirement, it is not just needing $X amount to live comfortably, it’s the lifestyle you choose to go with it. Are you wanting to be teeing off every morning at 10am while living in your own home, or living in a retirement community where you don’t need to worry about gardening and unblocking the guttering?
Those are your real goals. They are the things you want to do and achieve; not the path you take to raise the funds. Otherwise, you could say that winning Lotto or inheriting a fortune was a goal too; and while that would be a nice thing, it’s not realistically an achievable, measurable goal.
So when you think about your financial goals, these are the priorities and targets you set for how you want to acquire and spend your money.
What are your financial goals?
Figuring out your financial goals should be fun. Sitting down and dreaming of a house among the lavender in Provence or a bure on the beachfront in Bali isn’t a difficult task. Think about what your perfect, ultimate life looks like; is it owning a classic car garage and spending your life tinkering away on gorgeous vehicles? Or is it owning your home freehold, having the freedom to spend time with the grandkids and not worry about money?
Take some time soon to work out what your true goals are and figure out how much money you’ll need to achieve each goal. Separate them from the financial path to get there. If everything on your wish list is not achievable, think about your priorities. What matters to you most?
Why are your goals so important to identify?
It’s so easy to say you’ll pay off debt or save more. But those big debts and financial roadblocks are easy to ignore when a dopamine inducing shiny new thing is dangled before you or a friend invites you away for a boozy weekend. Because money can give such immediate gratification, the bigger financial picture can be forgotten.
But when your goals are more tangible and are in the forefront of your brain, spending an extra $3000 more than you had budgeted for a car suddenly feels consequential. That $3000 extra for a car isn’t just a larger debt now; it’s also ten months more working until you can take a holiday. That cheap shopping trip where you buy a few pairs of jeans and shoes isn’t just $300 added to your credit card debt; it’s postponing your home renovation plans off another week or two.
Your true goals are what keep you going when you could easily go off track. Because an extra $500 in savings does not feel important, but that concrete goal of buying your first home does.
Choose your goals today
If you’re unsure what your goals are or how to reach your financial objectives, contact Sam Kodi, who can help guide you in the right direction. Other financial advisors might tell you a goal is paying off your mortgage and having a savings plan but they haven’t grasped the concept of your real goals vs the financial strategies to get there. While debt is important to address, having less of it is not your true goal. Knowing what your true goals are and making a plan to get there will significantly increase your chances of success.