Last week we emphasised how important it is to know how much money is coming in and how much money is going out of your household. We also shared some tips on how to accomplish this. We trust you found the information helpful, filled the prescription, and are now ready for step 2.

The next step in your financial check-up is evaluating your financial goals. Did you make progress on those for last year or did you fall short? Do you know why? Have your priorities changed in the New Year? Your answers to these questions will indicate if and how you need to revise your goals. If you are setting financial goals for the first time, think of what you wish to accomplish this year and write them down.

Bear in mind, when we talk about financial goals, we are not talking about the New Year’s resolutions we vow to achieve year after year. Since New Year’s resolutions, which are often very general, tend to flop in the first few weeks of the year, goal setting is a much better option. With goal setting, you are positioning yourself for success by creating a comprehensive plan to get you where you want to go. If you had New Year’s financial resolutions, take some time to turn them into goals.

An important element of goal setting is making sure that your goals are SMART – that is, Specific, Measureable, Achievable, Realistic and Time-bound.

Instead of committing to “saving more this year”, commit to a specific goal – say, “save $5,000 for your emergency fund by 31^st December 2016.” With this goal, you know exactly how much you want to save, where the money is going and the deadline for achieving the goal.  

When setting SMART goals, you also need to ensure that the goal is realistic in the timeframe that you’ve set, based on your circumstances and identify ways that you can achieve the goal. Break your goal into smaller pieces that you can handle more easily. Make sure to also measure throughout the year whether or not you are on track.

Your prescription for Week 2:

• Write down your SMART financial goals for 2016
• Prepare a plan for achieving them

Next week will focus on examining your budget.