Insights categories - Personal investing
Personal investing

How to set SMART money resolutions

Many South Africans make money resolutions at the start of the year. But come mid-year, when the optimism of the new year has faded, seeing through these goals may become tough, preventing many from realising their well-intended plans.

The trick to making resolutions stick is to set SMART financial goals, ones that are specific, measurable, achievable, relevant and time bound. The SMART approach is particularly useful when applied to finances because you can set and measure financial goals in a very objective way.

The first principle centres on setting specific goals by refining broad aspirations into well-defined targets. State what will be accomplished and the actions to be taken to achieve each goal. For example, instead of “start an investment” as a goal, set precise objectives, such as “start an investment to save R50 000 within 12 months as the first step towards accumulating for a down payment on a property in five years”. This level of precision enhances focus and helps make the goal more attainable.

The second principle emphasises the need for measurability. By setting quantifiable milestones, you can track your progress and remain motivated. For example, with a specific goal such as R50 000 you can break it down into monthly amounts or decide upfront how you will use any expected bonuses or cash lumpsums when they arrive. No matter which way you choose to save, a measurable goal enables you to monitor your own financial growth and celebrate progress along the way.

Achievability, which is the third principle, means that goals need to be realistic to maintain the enthusiasm to achieve them. Creating a financial plan and assessing your income and expenses, will help you to establish realistic goals. Following on from the previous steps, you can now evaluate very clearly whether your specific goal is achievable – ask yourself, are you realistically able to save the required amount every month? What planning needs to be in place so that you have the discipline to invest expected cash lumpsums rather than spending them?

The relevance of goals, the fourth principle, refers to aligning your aspirations with your long-term plans and personal values. By so doing, you are more likely to be committed and inspired throughout your financial journey.

The final principle centres on establishing time-bound goals. By setting deadlines, you gain structure and a sense of urgency. Crafting a timeline helps facilitate progress towards your objectives and ensures you take accountability. If you don’t have a deadline, you might find yourself in exactly the same place a year from now – not having made any progress on an important personal goal.

How to stick to your long-term plan

Of course, setting and then working towards achieving SMART goals doesn’t happen in a vacuum. External forces in the form of temptation on the one hand, and news headlines on the other, can play havoc with our best intentions.

Avoid the temptation to make impulsive decisions based on short-term market fluctuations, that might impact your investment value, or speculative trends. Instead, focus on long-term goals and stick to your plan.

While this may seem easier said than done, consider using the SMART system to set quarterly goals, guided by some of the annual finance-related calendar events.

Top tips for quarterly goal setting to foster good financial habits

Sound investor behaviour is a key ingredient for investment success. While we all have the best intentions, sticking to them can be a challenge. A good, independent financial adviser can assist you by putting a plan in place that meets your personal goals and objective – and help you remain committed, even when the going gets tough.

Select a site

The financial services, products or investments referred to on this website are not available to persons resident in jurisdictions where their availability or distribution would contravene local laws or regulations and the information on this website is not intended for use by these persons. This website is for information only and does not in any way constitute a solicitation or offer by Allan Gray Proprietary Limited or any of its associates or subsidiaries (collectively “Allan Gray”) to buy or sell any financial instruments or to provide any investment advice or service.

By selecting one of the countries below I confirm that I have read and understood the above and that:

(a) I am not a South African citizen; or 
(b) I do not reside in the Republic of South Africa; or 
(c) I am not otherwise a person to whom the communication of the information contained in this website is prohibited by the laws of my home jurisdiction; and 
(d) I am not acting for the benefit of any such persons mentioned in (a),(b) and (c) and 
(e) I confirm that any investment with Allan Gray is based on my own initiative and not due to any offer or solicitation by Allan Gray.