Savings goals allow you to work towards concrete achievements, such as paying off your bond, replacing items for cash if they break, and securing a comfortable retirement. If you have no savings, you may find yourself unable to pay for critical expenses, such as school fees, or your insurance excess after an accident.
In this article, we explain how setting goals determines your savings outcomes, and where you should start.
Tip: Learn how saving and investing can boost your wealth.
Why is goal setting necessary?
Mathematician and information scientist Richard Bandler, linguist John Grinder, and systems and change expert Gregory Bateson, have shown via neurolinguistic programming (NLP) that goal setting is necessary to achieve positive outcomes in human behaviour. This includes saving.
“Goal setting directs the language we use about ourselves, which influences our beliefs about ourselves, and this impacts what we can achieve,” explains psychologist Quinton Williams.
A simple example is looking for a parking bay at a busy shopping centre. “Research has shown that people who visualise an open parking bay are more likely to find one than those who aren’t positive about their chance of finding such a bay,” Williams notes.
Setting SMART goals
People who don’t set goals may save but have no clear idea of what they’re saving for. “That’s like saying you’re going on holiday but you don’t know the destination,” notes Rita Cool, head of individual consulting strategy at Alexforbes.
Cool and Williams recommend setting SMART goals based on the fundamentals of NLP thinking. This means goals that are:
- Specific. Outline the desired outcome in the simplest possible way, for example, “I want to save for my daughter’s education” or “I want to take a holiday in Italy”.
- Measurable. Calculate the cost, and how long it may take you to achieve your goal. For example, what will it cost to send your child to university in seven years’ time? If you’re saving up, you’ll need to track your progress each year.
- Achievable. Is your goal achievable? If your daughter wants to study at a UK university, you may need to save R500,000 for three years of study, plus accommodation and travel costs. If this isn’t realistic, consider an alternative, such as studying at a local university.
- Relevant. The goal is relevant if your daughter wants to become a biologist. Your goal for her to attain a tertiary qualification aligns with her goal to enter a field that requires the same.
- Time-based. If you know you have seven years in which to achieve your goal, you’ll budget to ensure you can save the required funds.
Cool says not every goal needs to be substantial and life-changing.
“A goal can be as simple as making sure you have adequate life cover or car insurance – boring, grown-up stuff that can nevertheless have a big impact,” she says.
Saving becomes easier once you see the benefits. “If you’re able to use cash to cover an insurance claim shortfall, the incident will be a mere inconvenience rather than a disaster,” Cool points out.
Tracking your goals
Track your goals, but don’t let a diversion take you off course.
“If you take a wrong turn, it’s not the end of the world – just get back on track as soon as possible. It’s what you do consistently, month after month, that counts,” says Cool.
The key is to plan ahead rather than have a vague hope that you’ll get where you need to be.
“Set out with positive intentions and believe you can make the best choices for yourself,” says Williams. “Don’t be a victim of negative self-talk, which may prevent you from setting goals at all.”
Remain motivated by keeping the end in mind, whether an emergency fund, a trip to Italy, or sufficient medical cover to protect your health as you get older – all of which could improve your life immeasurably.
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