Rassie Erasmus took over as Springbok coach with 618 days to the Rugby World Cup. At the time the state of Springbok rugby was dire, with the team having lost 12 out of 25 games. When Rassie took over the coaching role, he had a clear vision: to turn around the team’s poor performance and ultimately win the World Cup. He adopted a driven and focused mindset, set clear objectives and put a framework in place to achieve his goals.
With focus and determination, we can achieve great things. This mindset can be applied to improving your financial health, even if your latest scoring track record has been below par. As 2019 comes to an end, what is your game plan for the new year? Have you set your sights on your 2020 vision? Belinda Carbutt from Allan Gray discusses "SMART" goal setting and applies this technique to smarter financial planning.
Setting goals can often be easy but achieving them isn’t. Applying a SMART goal strategy can assist us in creating a framework for success. SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely, and this approach works well when we consider our financial goals.
1. Set a specific goal
Have clarity around what you are trying to achieve. The goal should be unambiguous. Know what you want to accomplish, by when, and why you want to achieve this goal. Rassie didn’t just want to generally improve the Springboks’ scores; he wanted the team to win the 2019 World Cup.
In your financial life, an example of a general goal would be wanting to create an emergency fund. A more specific goal would be committing to save 10% of your salary each month to be able to cover three months of living expenses.
2. How do you measure success?
As with the rugby score and the team’s record, your financial health comes down to numbers. Your financial goal should have criteria for measuring progress. If there are no criteria, you will not be able to determine how you are doing.
Building on the emergency fund example, check your balance from time to time to determine if you are on track to achieving your target. This will create a sense of focus that will be a stepping stone to achieving your goal.
3. Is your goal achievable?
How does your financial goal fit in with your other dreams and aspirations? Do you really want to make it happen? And do you believe you can do it?
You are more likely to achieve a goal that resonates with your values. Underlying the motivation to win, Rassie stressed the importance of a win for the South African nation and the unity it would create.
If you are focused on minimising the stress of an unexpected financial shortfall by creating an emergency fund, and you are fully committed to making small sacrifices to reach this goal, you should be able to achieve it.
4. Is your goal realistic?
It is important not to set an impossible goal. A goal should stretch you and make you feel challenged but should also be realistic. Given your unique set of circumstances, how much capacity do you have to reduce spending and increase saving?
If you set the bar too high you may land up giving up. Commit to an amount you can manage and talk to an independent financial adviser if you need assistance.
5. Make your goal timely
Committing to a start and end date will help to provide focus and direction for seeing your goal through. If the goal is not time constrained, there will be less sense of urgency and motivation to achieve it.
Going back to the specific goal in point 1: You could commit to saving 10% of your salary each month, starting in February, so that you can cover three months of your living expenses by the end of the year.
Rassie has been lauded as a smart coach: He introduced a new game plan and set of strategies that supported the Springboks as they achieved their goal. As the curtain comes down on 2019, take time to set your financial goals for next year to serve as a basis for your longer-term plan. Stay focused.
This article was published on the Allan Gray Website on 8 Novemeber 2019.