How to set realistic financial goals

How to set realistic financial goals (Photo: iStock)

Are you feeling overwhelmed by financial goals? You're not alone. Just as the second quarter offers a fresh start, financial advisor and coach Margaret Njeri provides a clear and professional guide for women on how to effectively set their financial aspirations and turn them into reality.

Why is setting financial goals important?

It helps you develop discipline by sticking to structured financial plans and timelines. Additionally, it helps you to celebrate milestones and gives motivation to do more.

Is there a definite outline to make financial goals more viable?

For sure. I fully recommend people to take up the SMART approach: specific, measurable, achievable, relevant and time-bound. With this guide in mind, financial goals need to be realistic with effective timelines. Say, when setting a goal for a year, you need to know that this is the amount of money to have.

How do you set short-term, medium-term and long-term financial goals?

You need a clear plan of what goals you want to achieve. A short-term goal is any goal to be accomplished within a year, like building an emergency fund, paying off small debts or saving for a quick course. Medium-term goals last between one and five years, like buying land, a car, starting a business or investing in a major skill. Break them into monthly targets and use savings tools like SACCOs, money market funds, insurance or bonds. Long-term goals take more than five years; think retirement, building a home or children’s tertiary education. These need consistent investing; for instance, if you are saving for your retirement, consider pension plans, unit trusts, or land and property investments and a locked education savings plan for education.

What common mistakes do women make when setting financial goals and how can they avoid them?

Most of them rely solely on their knowledge, get into the wrong investments, don’t invest early and follow trends and wrong financial information. They can avoid this by having a financial advisor.  

How do unexpected life changes affect financial goals and what can you do during such times?  

Life changes can make you take a long time to achieve goals. I’d advise setting up an emergency fund and having investments and an extra job as a safety net during emergencies.

What are some of the effective strategies to stay disciplined in achieving financial goals, especially when progress seems slow?

Start with small, short-term goals, even weekly, that will lead to big, long-term dreams. As you celebrate small wins, remind yourself of the bigger picture. An accountability partner who shares a similar or a different goal, as well as a mentor, can help push you towards achieving your goals. And have a strong belief in your goals.  

How can YOU track progress?

It is easy to track small goals since they are clear. With long-term goals, I normally advise people to review on a day that you celebrate, like birthdays or every six months and adjust when they are not able to achieve them within set deadlines.

What financial tools can women use to stay organised in their goals?

A SACCO, financial advisor or coach, books on finance, an accountability partner, a mentor, and a budgeting app.

How can YOU begin setting financial goals if you are new to personal finance?

Start by tracking your income and expenses, then list your needs and dreams. Begin with small, realistic goals to build a saving culture and confidence.

What role does investing play in achieving long-term financial goals and how can someone get started with investing?

Investing helps grow your money over time. To get started, set a goal, understand your risk tolerance, research, and mostly seek help from a financial advisor, and begin with simple options like SACCOs, money market funds or unit trusts. From there, grow your risk appetite by investing in high-risk investments, for they offer higher returns.

How can women ensure their financial goals align with their values and priorities?

They should first consider what matters most; is it family, freedom, security or impact? Then, set goals that support those values; for instance, if education is a priority, prioritise saving for school fees.