30th September 2011

How to set and achieve your financial goals

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Financial Goals must be part of your overall business planning and strategy. Generally when setting any goals they follow a pattern which I like to compare to planning a journey on your sat-nav: you have a starting point- where you are now, you put in your end point- where you want to get to, and the sat nav gives you the exact route to be taken. This can be summarised by MOST- Mission, Objectives, Strategy and Tactics:

Mission- the overall role or mission of the business

Objectives- where do we want to go

Strategy- how do we get there

Tactics- the exact route to be taken

Mission:

When setting your financial goals don’t limit your aspirations, remember this is the first step in the process so think big. Where do you want your business to be in say 5, 10 or 20 years?... to be brought out at a handsome profit?... to have the business debt free and with a large cash surplus?... for you to have retired early and your family now running it successfully?... these are just a few examples of the types of goals you may aspire to. As an entrepreneur and business owner you have decided to take control of your own destiny- including your financial destiny.

Objectives:

Objectives (or goals) are the specific steps needed on the path towards your overall financial mission. Like all business objectives your financial objectives must be S.M.A.R.T.- sensible, measurable, attainable, realistic and time dependent. Afterall there is no point in setting an objective that is impossible to attain- an objective may require a small change in behaviour, it shouldn’t require a complete change in your personality!

Strategy:

These are the specific steps in order to meet your financial objectives. If an objective is to reduce overheads by ten per cent how can this be achieved? Does it entail a review of all outgoings to see where savings can be made- electricity provider (ESB/ Bord Gais/ Airtricity..), postal services (An Post/ Citypost) etc..

Tactics:

The “doing” of achieving your financial goals- and the hard part! You need to establish a baseline or starting point- which is easier than most people think. Spend time listing all monthly income on one side, all outgoings on the other, and subtract one from the other in order to establish exactly what your current position is. Remember to include everything- if you have an annual cost (such as health insurance) divide the total cost by twelve and add the amount into your monthly budget planner. Be honest with yourself when doing this exercise- you are fooling no-one if you decide to exclude something (if you smoke 20 cigarettes a day how much does this cost per month- €9 per day* 30 days…). Do not be overly alarmed if the monthly figure is negative, the whole point is to give a true picture from which your tactics will develop.

Financial Planning is not complicated- all it takes a bit of time and honesty. Following the steps above should give you a roadmap showing where you or your business is financially now, where you want to go and the route needed to get there.