Mr. and Mrs. Ojekwe taught their Children early in life to save money with the use of a piggy bank. Their second child, Amaka, who is now a 29-Year-old Banker, took to this habit and has now turned into a prudent saver. Amaka saves a certain percentage of her earnings in a traditional savings account monthly. At the beginning of every year, she always has a mental idea of what she wants to achieve with her hard-earned money and spends the savings meeting her financial goals as it crosses her mind in no order of priority. Now she’s bugged down with worries because something in her keeps telling her that she can do better with her savings and the achievement rate of her goals, but she does not know how!
What are financial goals?
Financial goals are objectives that you want to achieve with your Finances. They are personal goals that have financial cost attached to them. We have various financial goals at different stages in our lives. Just like everyone of us, Amaka has a lot of financial goals running through her mind and she needs to create a plan that would help her achieve these goals and ensure her money is working harder than it is currently doing.
How can Amaka get more?
The first thing Amaka needs to do is to identify and be clear on her goals. She needs to write down these goals. Her goals could be buying a car, creating an emergency fund, planning for her master degree abroad, paying her children school fees, paying for house rent, planning for vacation, buying groceries for the home etc.
Secondly, she should align each of these goals with the SMART acronym. SMART being Specific (Specific and clear goal as much as possible), Measurable (measurable and quantifiable so that you know when you can achieve it), Achievable (attainable based on current facts and situations. Not on assumptions and conditions), Realistic (choose a goal that is realistic which is not a distant fantasy) and Time bound (have a clear timeframe in mind which would enable the achievement of your planned goals).
Thirdly, she needs to understand the significance of each goal and prioritise them appropriately. She needs to avoid all distractions in pursuit of the goals because it is not an easy task achieving financial goals. She needs to be disciplined even though she might not be able to achieve all her goals.
Finally, she should categorise her goals into short term goals (goals to achieve between 0-2years), medium term goals (goals to achieve between 2 -10years) and long-term goals (goals to achieve above 10years). She should save for her short-term goals with short term savings instrument, medium term goals with medium term savings instruments and long-term goals with long term savings instrument. Amaka put all her savings in a traditional savings account regardless of the tenure and priority. This would not maximise the potential growth of the savings towards the different categories of goals. Funds for short term goals should be invested in short term investment instruments such as savings account, money market fund, treasury bills etc. Funds for medium term goals should be invested in medium term investment instrument such as balanced mutual fund and money market fund while savings for long term goals should be invested in long term investment instruments such as stocks, equity based mutual funds and real estate. This break down of goals would ensure that the savings are working harder than just saving every money in one instrument.
We hope these steps would clear Amaka’s worries and make her desire towards achieving her financial goals an improved success.
