The Process Of Goalsmapping
In the beginning of the year, many of us spent time reflecting and setting goals for the year. This then serves as a benchmark for us to evaluate our progress. Setting goals instills us with a sense of focus and direction.
Have you ever felt that your goals cannot be achieved?
Or do you feel that you could have planned better?
Proper goal planning can be a challenge and we often need guidance on it.
This is where the process of GoalsMapping comes in extremely useful.
So, what is the GoalsMapping process and how can it aid you? Put simply, it is a planning process designed to help you realistically achieve ALL of your life’s goals within the time frame that you want.
The central and most important part of GoalsMapping is to prioritize setting the right financial goals. As a saying goes, “if you fail to plan, you are planning to fail.” The beginning of your entire financial planning journey is crucial as it will form the basis of the entire process. Where you choose to invest your money will be very much dependent on the goals you’ve set from the start, such as the desired age of retirement and the amount of money you need for retirement.
This process aims to have your cash flow and savings aligned to achieve your long term goals. To do this, you will need to have a clear vision of what your goals are, manage your cash flow effectively, take advantage of the compounding effect of interest, find the right balance of risk and returns, and have adequate insurance coverage so your plans are not derailed by an emergency.
The resources available to us to achieve our goals are limited, which naturally means that all our goals are connected. We will thus need to consider which things are more important and which needs to be “sacrificed”. For example, it is likely that you will need to settle for a mid-priced car if your eventual goal is to own a big house. Or if your goal is to send your children to prestigious schools with expensive school fees, you might even need to do without a car in order to sustain that. It is thus important to spend some time coming up with financial goals that are in consideration of all the different aspects of your life so that you can begin the GoalsMapping process properly. It is advisable to do this with your spouse if you have a family.
I have broken down the steps of the GoalsMapping process into the acronym G.O.A.L.S for easy remembrance.
G: Goals Mapping
Your ultimate goals are central to this process. It is important that you put a price on each individual goal. Layout your goals in chronological order, starting from the nearest one. Put a price to each of these goals and see if it is within your available financial resources.
For your goals to be achievable, you will need to plan based on your current financial circumstances and affordability. Let’s say your goal is to purchase a high-end car but your current financial resources are insufficient to afford this for the next 3 years. In this case, you should either extend the time frame to achieve this goal, reduce the amount of cash needed for it, or start saving more today at a higher interest. That said, like your income and ability to save changes, your financial goals can change accordingly too. It is hence crucial that you review your goals annually to take into consideration these changes.
O: Overall Resources
At this stage, we are looking at two most important numbers - your Cash Savings in the bank and the Annual Surplus you are able to save every year. This will vary among individuals as everyone has different spending habits and income potential, so this step serves to calculate and identify your overall financial resources
The purpose of this step is to realistically figure out how much funds you can allocate for the future. You can separately list existing investment assets that can be used to achieve your goals as well, if you have any. During this phase, you can also identify areas where you can cut down on your spending in order to save more money for the future.
A: Allocation Of Resources
The next step is to allocate your Cash Savings and Annual Surplus towards each goal. Instead of planning one goal at a time, we are planning all your financial goals simultaneously in this step. As we go along and allocate funds to the different goals, another consideration is to look at your existing investments and decide when you would like to liquidate these investments to help reach your goals.
The reason we are avoiding taking a linear approach to financial planning is because it is not as practical and harder to reach your goals. You might allocate too much funds on an earlier and be left with insufficient funds to achieve the next goal. Planning all financial goals simultaneously gives you a complete picture and allows you to allocate different amounts of funds effectively to each respective goal. You can place the different funds in separate bank accounts, or different investment instruments.
L: Leverage Your Resources
Upon completing the allocation of your funds, you’ll come to realize that keeping your savings in the bank will not get you very far towards achieving your goals. In the event that you are unable to adjust the time frame to achieve your goals or further decrease your expenses, the only option left is to increase the returns that you receive from your investments. This step requires you to leverage and use your savings and surplus to the maximum advantage by finding the right instruments to invest and grow your savings to the desired level within the time frame set.
S: Strategic Testing
After the process is complete, you will finally need to strategically test if your plan is resilient enough to cope with different types of challenges. For example, in the event of retrenchment or disability, do you have enough emergency funds or insurance coverage to cover your expenses? Test your plan and ensure that you are prepared enough to withstand the impact of whatever problems you may face.
Coming up with a good plan is key to successfully managing your finances, but it is only a starting point. Carrying out the plan and making sure you stick to it to the end is just as critical ls. It is easy to plan, but taking action is the more challenging task. Most of us may not have the discipline to stay on track. It is very important that you regularly review your plan with your coach and consultant as your financial situation changes.
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