Creating achievable financial goals

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Show yourself the money. Give yourself a sound financial future.

Head of personal banking at Standard Bank, Sugendhree Reddy. (Supplied)

A well-built financial plan doesn’t come from some magic formula or secret code that’s known only to an elite few, it’s an essential part of a secure future. Outlining and managing financial goals is a fundamental part of building this future and you need only an understanding of some basic tenets, a well-designed financial plan, the flexibility to adapt to change and commitment to achieve them.

“It seems to me that a lot of people still believe that there is a special trick to achieving financial independence and staying out of excessive debt, but nothing could be further from the truth,” says Kerry Fynn, chief executive of AlphaWealth.

“The reality is that the same old-fashioned rules that have always been around remain applicable and it is never too late to heed these guidelines and put them into practice.”

Like many programmes there are boxes you can tick to guide you in the process of developing a financial plan and robust goals for the future, and most experts tend to agree on what they are and the order in which they should be managed. It is important to have a plan and to thoroughly understand your financial position. 

“You need to ensure that each goal is achievable in the context of the individual’s situation and therefore must be realistic given their circumstances,” says Marius Bester, financial advisor at Citadel. “This is a type of reality check that takes into consideration the resources that the individual has available to them to achieve their desired financial goals. If the resources are insufficient, the goals must be adjusted.”

Developing a financial plan must consider existing finances along with many other aspects of a person’s financial history and lifestyle; it is a multi-step process that examines all relevant angles and issues.

You need to ask the pertinent questions, such as what the full scope of the financial situation is, what the monthly income and expenditure is, what the assets and liabilities are, what the risks involved are and who the dependents are.

Lloyd Buthelezi, general manager at Nedbank Financial Planners, adds: “Full knowledge of your own financial situation, from budgeting and current circumstances to clear goals and objectives are basic things that every individual should know and manage.

“It requires discipline, focus, sacrifice and an understanding of what it will take to achieve your goals.” It is essential that a plan looks at the foreseeable future and makes provision for both planned and unplanned events.

Have an emergency fund that can tackle unexpected expenses and put mechanisms in place to manage the big risks that could potentially affect your finances in the future such as medical aid, death and disability, home and car insurance. Sugendhree Reddy, head of personal banking at Standard Bank, says: “All financial plans are unique and tailored to suit an individual’s specific needs. There are three pillars to a sound financial plan and first off you need to set up your risk portfolio and this is, in my opinion, the most important.

“It includes life cover, disability, income protection and dread disease. The second is the retirement portfolio and the last is the investment portfolio. “Ask questions, get advice from financial planners, do your homework by reading and, if you get these three pillars established now, all you do year on year is update and maintain your sound financial plan.”

An achievable goal

So, what is a financial goal? What is considered to be worthy of adding to a financial plan and investing money into to become financially secure? Marc Sevitz, director at TaxTim, defines these as: a particular cash flow solution, tax planning, retirement savings, budget planning for particular outlays, savings or opening up a business.

“The financial side of life is about planning, whether it is short-term for a specific intended purpose or longer term for retirement savings or a university fund, for example,” says Sevitz.

“It is essential to plan for these occasions and for the unexpected rainy day. Without clear financial goals there could be a situation where one or more key needs cannot be met, which could result in financial hardship.” As you work through the factors that affect and contribute to your financial status it will become easier to establish which financial goals are achievable and which are not. 

“You can’t work miracles and you can’t expect miracles from any financial plan,” says Godfrey Madanhire, founder of Dreamworld Promotions.

“You need to face the reality of how much money you earn and what that means in terms of how much you can save and how much will be realised. Accept that your financial future is built one brick at a time and that you need to have patience and a long term view.”

It is also worth considering where you are in life and at what age you are approaching the development of your financial plans. “If you are starting early, then your goals may be more spread out over the long-term and short-term, if you are arriving late to the affair, then your overall plan will be substantially different.

“Start today, if you can, and the results will speak for themselves,” says Fynn. “The effect of compound growth is staggering and not to be underestimated, and it simply follows that the earlier you start saving and investing the more effective this will be, but never let the fact that you are starting late deter you from starting at all.”

Better late than never

Michelle Dubois, legal marketing specialist at Liberty says: “Achievable goals will be different for each and every person as their priorities will be determined by their life stage. Those who are just starting out may feel that their goals in the short-term to medium-term need to be more achievable than their long term goals.”

Driving a sound financial future demands work and commitment and awareness. Budgeting and numbers do not allow for ego or hope, they offer up only the cold facts about any financial situation and if you are prepared to accept the uncomfortable truth about your finances, then you are more likely to develop realistic goals and plans.

“If you and your partner earn R40 000 a month between you, it’s not a realistic goal to have six overseas holidays a year, or to have a million rand a month as your income in retirement,” says Gareth Cotton, financial consultant and course instructor at GetSmarter. “Goals must be inspiring and require focus, but they must also be based in reality, if they aren’t, then you simply risk demotivating yourself when you realise they can’t be reached.”

On this every expert agreed — an achievable financial future is based on reachable goals and that they will ask for a certain amount of personal sacrifice to attain them. They also emphasised the importance of having such goals, especially within the current economy.

“Without goals you become a victim and you can get what you didn’t know you didn’t want, or some other person or society’s reality,” says Stuart Kantor, founder of Kanan Wealth. “If you create goals you get what you want, so write down the things you need from life, acknowledge what you need to do to achieve these things and take the steps towards them.”

Then approach the entire process with a measured calm, emotions have a tendency to affect decision-making and when it comes to money they are usually at the fore.

“Remove human emotion as a decision-making factor as much as possible so you don’t make decisions based on fear and greed. Look to hiring a reliable financial planner who can support and advise you, and make sure you stick to your plan, especially when your emotions threaten to take over,” says Fynn. Financial planning is not magic nor is it as daunting as most expect. It is just a task that, if done well, can do magical things for your future.

“Most people plan their next holiday in more detail than what they plan their financial goals,” says Rita Cool, certified financial planner at Alexander Forbes.

“Just because it sounds difficult or scary, people shy away from planning, perhaps they are afraid of what they will find out about themselves. If you don’t have a financial plan, life will just happen and before you know it you are retiring and you haven’t achieved anything. 

“A goal isn’t something that happens overnight, you have to work at it otherwise it is not a goal, just a dream.”

This article has been made possible by the Mail & Guardian’s advertisers. Contents and pictures were sourced independently by the M&G’s supplements editorial team

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