Setting financial goals and objectives for your future

Setting financial goals and objectives for your future

Where would we be without goals and objectives? Even if we don’t think about it, we usually wake up with a plan for the day. Whether it’s doing a grocery run, going to work or calling a friend, it’s how we structure our days, weeks, months and years. And, it shouldn’t be any different for our financial goals and objectives.

In terms of our finances, setting financial goals and objectives is how we achieve the future that we want for ourselves. Most of us will be familiar with the concept of goal setting, but where do objectives fit into this whole process, and what is the difference between a financial goal and an objective? The terms are often interchangeable, but they’re not the same, and one can’t work without the other.

What is a financial goal?

A financial goal is quite simply what you want; the end destination. Establishing your goals requires looking at the whole picture – they should be general and long-term in focus.

They can change; they’re not concrete.

It’s having a vision of where you want to end up and a general idea of the journey along the way.

What is a financial objective?

Financial objectives are the specific steps on your journey that will get you to that end destination. They’re concrete, unlike goals. They’re a measure of your progress to reaching those goals.

Objectives are vital for giving you time to check in on your progress and review how you’ve done up to this point, or if there is anything we could change about the route that will help you reach your goals quicker.

Remember, your objectives should be SMART:

Specific – what do you want to achieve?

Measurable – can you quantify when you have reached your objective?

Attainable – ensure your objectives are within your grasp and commit to achieving them

Relevant – is the outcome a challenge without it being unrealistic?

Time-based – when would you like to achieve your objective?

To paint an accurate picture of how realistic your objectives are and what time scale you’d need to aim for, our financial planners use sophisticated cashflow modelling software.

Rudders and oars

To understand the differences between financial goals and objectives, let’s imagine a rowboat.

The rudders determine the direction you go in, much like your goals direct you through life. If you focus on one goal, keeping the rudder in one spot, you continue to move forward. However, if you chop and change between goals and directions, you end up rowing in circles.

But, without the oars, you won’t be going anywhere. They are your objectives and determine your progress. Without the rudder, you couldn’t steer, and without the oars, you couldn’t row; both are vital parts needed to get you to your destination.

What are the different types of financial goals and objectives?

Here are three common financial goals and some example objectives to complement them:

Goal – Have a comfortable retirement

Objective – Save £X by a specific date to be able to retire at age X

Goal – Enjoy holidays and travel

Objective – Spend £x on holidays each year.

Goal – Ensure family are taken care of

Objective – Leave £X in gifts throughout each year

Whilst setting goals is brilliant, sometimes in life, unfortunately, we can’t always do everything we want to. For instance, using the above examples, gifting large sums of money to your family could limit the amount you have left to put towards travel or retirement, and vice versa. That’s why we also encourage our clients to prioritise their goals.

In terms of time-scale, there are usually three different types of financial goals. These include:

  • Short-term goals (< 1 year)

E.g. Making minor home improvements, saving for a holiday, building up an emergency fund.

  • Mid-term goals (3 – 5 years)

E.g. Saving for a new car, paying off any credit card debt, building an investment plan.

  • Long-term goals (> 5 years)

E.g. Saving for a new house, saving for retirement, starting a new business venture.

Our goals-centred approach is at the core of what we do – it’s a large part of what makes us different from other financial planning firms. To help us formulate the advice we give, we work with you to help you realise your financial goals and then look at the best way to achieve these goals, setting financial objectives to help you get there.

If you would like help with this and think you could benefit from some written exercises, we’ve got just the resources for you:

  • Answer the three life planning questions here to help you realise your vision and goals
  • Write down your goals here, including the when, why and how.

If you have any questions or want help establishing your goals, then please feel free to get in touch and speak to one of our financial planners.