Thu | Apr 26, 2018

Be a financial goal setter in 2013

Published:Sunday | January 20, 2013 | 12:00 AM

To what extent did you achieve your personal financial planning goals in 2012?

You can only determine how well you did if you had set yourself clearly defined and specific goals stating exactly what you wanted to achieve, how, why and when.

Whereas you would be in a position to say if you have achieved your one-year goals, you would only be in a position to say if you are on track with the goals you set yourself to achieve beyond that time.

If your goals were measurable, you would be in a position to say where you are in relation to where you should be. If your goals were realistic, you would have been satisfied at the time you set them that you were willing and able to work to realise them.

If they were achievable, you would have been satisfied then that you had the attitudes, abilities, skill and financial capacity to achieve them.

We often fail to realise our goals because we lack the commitment and capacity to do so. On the other hand, we sometimes do not make them challenging enough and thus become complacent.

Nonetheless, it is good to set goals because they help to give direction and to allow for focus to be maintained when there are setbacks.

start with the budget

In going forward, here are some goals you may wish to set yourself relating to the management of your money.

In the first instance, you would need to start budgeting or, if you have already been doing so, to improve it. Identify a specific level of savings that you want to make in a specific period, for example, J$200,000 in the next five years.

You may describe your annual savings in dollar terms such as J$40,000 per annum or as a percentage of your annual income, for example, 20 per cent of your gross income. Your budget should reflect what portion of your income is to be spent on various living expenses.

How about your net worth, that is, your assets less your liabilities and which is the true reflection of your wealth? You may determine to grow your personal and investment assets at an annual rate of 10 per cent and 15 per cent respectively over the next five years.

Perhaps you are contemplating purchasing your first home. State the time by which you want to do so. Establish a price in your plans so you can put proper financial plans in place.

In setting your goals, remember to state clearly if you will incur debt and, if so, how much and for what purpose.

Set goals relating to how much you want to invest in a given time period and the yields you want to derive from your investment portfolio so that you can set a policy to guide your programme.

Include in your goals a plan to improve your financial literacy so that you can enhance your chances of making independent informed financial and investment decisions.

Plan to take full advantage of all applicable tax benefits in the process of managing your investment and other assets.

make your own decisions

This will impact your investment policy, your estate plan, your retirement plan and your insurance programme but will require that you know what benefits are available and how to capitalise on them. You should not allow yourself to depend too heavily on professionals to make your decisions.

Determine what level of insurance you need to replace your assets in the event of loss. In the case of life insurance, determine how much would be required to meet the living expenses of your beneficiaries in the event of your early demise.

Look also at what would be required to liquidate your debts in the same circumstances and the kind and level of coverage that may be required to generate income for your retirement.

Notwithstanding what I said above, if you need help, do not hesitate to seek it from competent and trusted professionals.

What do you want your estate plan to look like? What do you want to leave for your dependents and the causes you care for? In what way do you want to provide for your beneficiaries? Are you satisfied with how your assets are registered?

What about your own retirement? When do you plan to retire? What level of income do you need to derive from your retirement savings to provide for yourself in retirement? What instruments do you want to use to fund your retirement programme? How much will you invest towards your retirement? What is your timetable for putting your plan into effect? Do not exclude these important considerations when you are setting your goals.

Do not forget to write down your goals and to visit them periodically. Evaluate the progress you are making and make adjustments if circumstances dictate that you do so. It is not as overwhelming as it seems.

Everything will not necessarily fall into place immediately. The most important step is to start. If you do not set goals, you cannot achieve them.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of "The Handbook of Personal Financial Planning", offers free counsel and advice on personal financial planning. Email