We all know that living in a city like Vancouver can be tough on the wallet. But with proper financial planning, you are able to move ahead with financial confidence!
Having a solid financial plan is key to securing your financial future. And if you’re like many in the city dreaming of owning property or retiring in style, then setting financial goals is a must. Think of it like a roadmap to financial success!
Just like there are short, mid, and long-term goals in life, there are financial goals too! These goals will help you figure out how much money you need to save, how much to invest, and how much to spend. Setting financial goals will also help you avoid the dreaded realization that retirement is quickly approaching and you haven’t saved enough.
In this article, we’ll show you how to set SMART financial goals that will help you achieve your dreams. Let’s get started!
Why Is Setting A Smart Financial Goal Important?
First and foremost, setting financial goals is critical! Setting SMART financial goals, on the other hand, is even better! Why? With rising interest rate and high cost of living in Vancouver, even a down payment on an apartment can cost an arm and a leg. That’s why we need to be extra cautious with our money and set goals that are Specific, Measurable, Achievable, Relevant, and Timely (aka SMART).
Let’s see why setting SMART financial goals is critical if you want to be financially successful:
1. Sense of Direction
The importance of having goals when it comes to your money is like having a GPS to guide you when you are lost in the woods! Without clear financial goals, it’s difficult to find purpose with money, and you might be spending money left and right without even thinking about it. Sure, those fancy brunches and daily lunches might taste great, but they’re not bulking up your bank account. But with SMART financial goals, you can focus your efforts and start working towards achieving your financial dream. You’ll know exactly how much you need to save and invest to achieve your dreams, whether that’s a detached house, a memorable vacation, or just a little extra cushion in your bank account. Smart financial goals will identify what lifestyle you desire for yourself and also guide you on exactly how much to invest so you can manage your money to meet this lifestyle.
2.Financial Strategy
Smart financial goals will help you identify the most suitable financial strategies that will help you meet these goals. If you have a clear financial goals, you can better allocate your cashflows, which will ensure you enjoy a bit now and still plan for your future. For those with ambitious financial goals, you may need to combine a few financial strategies to meet these goals. It’s important to see if you are willing to stomach the risk involved related to your implemented strategy.
3. Discipline
Setting smart financial goals will instill discipline when it comes to your finances. It will tell you how much to set aside as savings and investment to meet your goals. It will prevent you from spending money on things you do not need. Buying a coffee a day might not be a lot, but a coffee and pastry at Breka, a daily lunch, and dinner with friends at Cactus Club can really add up.
4. Shape Your Career Choices
We all know that Vancouver is an expensive city to live in, and the wages don’t always cut it. When you have a clear idea of what you want financially, it’ll guide your career decisions and help you make choices that align with your goals.
So, if you work as an IT technician and you’re dreaming big, it might be time to consider other ways of making more money. Starting your own business or taking on some extra side gigs can be great ways to increase your income and work towards your financial goals. And hey, why limit yourself to Vancouver? You could always look for work elsewhere or even land a remote job with a high-paying tech company.
Difference Between Short-Term and Long-Term Financial Goals
Let’s start with short-term goals. These are all about your immediate expenses and can vary depending on your personal needs and timeline. Typically, short-term financial goals range from 1 month to a couple of years. You might use short-term goals to pay off pesky credit card debt, set up an emergency fund, or save for things like a much-needed home renovation or that epic travel adventure you’ve been dreaming of.
Long-term financial goals, which usually are 5 years or more, require some strategic planning. You might even need to enlist the help of a financial professional. Long-term objectives could include figuring out the right amount of money for retirement, detached home ownership (dream for most Vancouverites), starting your own business, or how to transfer your wealth tax efficiently to your loved ones. These are the big goals that require a lot of planning and guidance, but they’re totally worth it in the end.
Mid-term goals, which typically take between 2 to 5 years to accomplish. These goals can overlap with short-term and long-term goals, making them extra important. Consider student debt repayment, saving towards further education, or saving for a down payment on a condo in Vancouver.
So, whether you’re planning for the short, mid, or long term, it’s critical to understand the various types of financial goals and plan accordingly.
How Do You Set SMART Financial Goals?
The ‘SMART’ in smart financial goals could be termed as an acronym that means Specific, Measurable, Achievable, Relevant, and Timely. These five components when applied to your financial plans will give you some degree of assurance of a secured future. To create a smart financial plan, there are tips you should follow so as to get the desired result. Some of the tips include:
1. Specific Goals
When highlighting your financial goals, ensure that you are specific as to what you want. Avoid basing your goals on some conditions that is out of your control. Being specific with your goals will give you clarity and every step from then on will be intentional and towards achieving the goals. Know what you want and how much you want it.
2. Measurable Goals
When you have outlined specific goals, it becomes easy to track. You can create points of measurement in-between your plan to see if you are on your way to achieving your set goals. For example, if you set out to save $12,000 in 12 months, you could assess your progress after 6 months to see how far you have come. You can also set weekly targets to ensure you are progressing steadily towards your goal.
3. Achievable Goals
In setting your goals, whether moderate or ambitious, ensure that they are goals that your current financial situation can attain or close. When setting your goals, also ensure your strategies are achievable. Do not base your strategy on chance or guesswork. For example, you set a goal of $50,000 in savings in 12 months with a $35,000 annual income. How do you want to achieve that? You either want to adjust your goals to within your means or increase your income.
4. Relevant Goals
Your goals need to be relevant. The goals should align with your values and long-term objectives. For example, if owning a 2 million dollar home next year means you’ll have to work extra hours and not being able to spend anytime with your loved ones or at a cost of your health, it may not be worth it. You may want to adjust your goal because it’s no fun to enjoy wealth when you don’t have health.
5. Timely
The last part is to put a timeframe on when you want to achieve your goals. Give yourself reasonable time, do not choke yourself. Putting a timeframe also instills discipline and focus towards achieving your financial goals.
These steps will help get you closer to setting smart financial goals and if you ever feel overwhelmed by the process, you can always involve a financial expert. You can start to develop your financial goals and run them by your financial advisor for his input.
Smart Financial Goals for Vancouver: 10 Examples For A Successful Life
1. Eliminate Credit Card Debts
Collate all your credit card debts and the interest rate, then assess how much from your income you can conveniently set aside to gradually pay off all your credit card debt. Set a time frame and ensure that it is a achievable time frame.
2. Create An Emergency Fund
An emergency fund comes in handy when there is an unexpected urgent expense that needs tending to. It prevents you from dipping into your investment plan intended for other goals. You can set a time frame of 6 months to 1 year to build an emergency fund that’s enough to cover 3 to 6 months of your expenses.
3. Set Investment Goals
This is the fulcrum of your financial plan because that is what will ensure the growth of your wealth to secure your future. In deciding on your investment goals, figure out the rate of return you want to achieve in the long term and identify the most suitable investment strategies and portfolios that can help you get there. It’s important to note that your investment portfolio should be diversified and matches your risk tolerance.
4. Retirement Income
Whether you are retiring early or at a regular age, it is always important to have retirement income plan to cater for your post-retirement. If applicable, you can set up a RRSP through your employer with a convenient percentage as a contribution, your employer might match a certain percentage of what your contribute as well. Your retirement lifestyle goals and the duration before retirement will determine your contribution. Ensure you are able to save enough before retirement to reach your retirement income goals.
5. Earn More Money
If you can, having multiple streams of income will go a long way in helping you achieve your financial goals. It allows you to set more money aside for savings and investment. Take per-time jobs and set aside a percentage of the earnings. Set a time frame you want for your side hustle. This is a relevant financial goal for those looking to save more money.
6. Financial Education
This is spending some time and money to learn how to better manage your finances. You can take online classes, buy books on financial management, or hire a financial planner. This will go a long way in making sure you are financially educated and will help you with determining your financial goals and relevant investment strategies.
7. Own Your Home
Owning a home in Vancouver is most people’s dream. With some planning, discipline and your effort in potential side hustles for extra income, you can buy your home in the next 5 or 10 years. Owning your home allows you to build equity with the banks money, and for those looking to upgrade to a larger home, you can make extra mortgage payments till the end of the year and see how far you have covered the principal sum. Owning a home also cultivates financial discipline as you will learn how to budget to ensure you are able to pay for your mortgage payments.
8. Buying Insurance
This is a very important goal. Protecting your life and your assets can not be overstated. You can look into life insurance, disability insurance, or critical illness insurance to protect against the “what if’s” situation. The last thing you want is a “what if” situation that throws your entire financial plan off course. Moreover, if it fits within the budget, some insurance also helps you build wealth over time.
9. Estate Planning
It is never too early to start an estate plan, especially for those with young family. Setting up a Will and Power of Attorney will ensure your loved ones are taken care of based on your direction. It allows you to continue to provide for your loved ones and create a legacy when you are no longer around.
10. Start a Business
Starting a business or side gig allows you to make additional money based on your time. It can supplement your income from your regular job. You want to set aside some starting capital and write out a clear business plan for increased success. You side gig could eventually become your full time if it runs well, and the reward will be worth every effort you put in!
FAQ
A SMART goal is one that is Specific, Measurable, Achievable, Relevant, and Timely for financial goals. This entails establishing clear and specific goals that can be met in a measurable and realistic timeframe.
A SMART financial goal for Vancouver could be to save $100,000 for a down payment on a property in the next 4 years by reducing unnecessary expenses and expanding income streams.
Some examples of financial goals for Vancouver are building an emergency fund, paying off debt, saving for retirement, boosting income sources, and investing in real estate or stocks. To attain financial success, it is critical to set realistic and quantifiable goals.
