Want to visualize your goals and plan your finances better? Start with your ‘why’

Setting financial goals isn’t just about making sure all your bills are paid, that you can afford to treat yourself occasionally, or that you have some money stashed in a bank account. It’s about creating a vision for your life and finding the ‘why’ that will help you achieve it.

Understanding the ‘why’ behind your financial goals is a crucial yet often overlooked aspect of effective financial planning for millennials. This ‘why’ represents your motivation, the driving force that keeps you focused and committed on your journey to financial success.

Here’s how you can get a deeper understanding of your ‘why’ to empower your financial planning and goal setting.

Start by asking yourself what’s most important to you.

Whether it’s achieving financial independence to explore the world, providing a stable home for your parents or future family, or launching your own business, understanding these core values and aspirations is pivotal. Aligning your financial goals with these life goals makes your financial journey more meaningful and motivating, an essential part of money management.

What you can do: Use the trusty SMART (Specific, Measurable, Achievable, Relevant, Time-bound) for your aspirations. For instance, if your goal is to start a business, set a specific savings target (for example: save PHP100,000 for that two-week Sapporo trip with your SO).

Then automate transfers to a savings account specifically designated for your major goals. This makes your saving efforts consistent and efficient.

Make an honest assessment of your past experiences and habits.

Your financial behaviors are often shaped by past experiences. Reflecting on your upbringing and past financial successes or challenges provides insights into your attitude toward money. This analysis is key to understanding your financial motivations and setting meaningful goals.

What you can do: Conduct a financial SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) based on your past financial experiences (you can see what we’re getting at here). Use this to create actionable strategies, like doubling your savings rate from PHP2,000 to PHP4,000 per month for your emergency fund, and identifying unexpected charges from past purchases so you can factor them into your budget in the next purchase.

Your long-term vision need not compete with your short-term desires

Understanding your ‘why’ in financial planning involves balancing short-term desires with your long-term vision. It’s important to enjoy the present while making financial decisions that secure your future. This balance is especially relevant in today’s culture of instant gratification.

What you can do: Whenever you feel like you’re straying from your course, use the Time Value of Money (TVM) principle to understand the long-term impact of your financial decisions. For example, on a salary of PHP60,000 per month (/21 days of work/8 hours a day), you make close to PHP360 per hour. Is that new PHP40,000 designer bag really worth 111 hours or 14 days of work?

Support your long-term vision with good investments. Get the essential knowledge you need on Earnest.

Revisit and be ready to make adjustments regularly

Your ‘why’ will evolve as your life changes. Regularly reassessing your motivations and goals ensures they remain relevant and aligned with your current lifestage. This flexibility is essential in maintaining a financial plan that reflects your aspirations and values.

What you can do: Much like anything that needs a SMART plan and a SWOT analysis, you’ll also need checkpoints and self-assessments for your financial goals, such as monthly savings rate, investment returns, or debt-to-income ratio. Review and adjust these KPIs during your bi-annual financial reviews. Take the time to track and review every three months while you’re starting out.

By understanding and embracing your ‘why,’ you’re not just setting financial goals; you’re embarking on a journey that transforms your financial planning from a mere task into a meaningful pursuit of your life’s dreams and ambitions. This approach is central to successful financial goal-setting and getting ahead of the game in decades to come.

Read more about how you can set and achieve your financial goals in this lifestage:

• Real talk: The hard questions you have to ask yourself about your finances
• Two strategies that will help you build a solid budgeting habit
• How to keep good credit (and why you need it)