Financial Strategy
February 3, 2022

How to Make Realistic Financial Goals


Close your eyes and picture the life you want to live five, ten, even twenty years from now. Do you want to buy land and make your own house? Do you want to start your own business? Do you envision sending your kids to the best university in the world or owning a fancy Range Rover?

Then think about what steps you are taking today that will help you get there. For most people, this is where the disconnect comes. Setting goals and dreaming big is easy, but transforming them into reality needs a lot of work and deliberate action, and that all starts with making realistic goals. This article will help you with exactly that.

What is a financial goal?

Before we even get to how to set financial goals, it is important to understand what a financial goal is. Simply put, a financial goal is anything you want to achieve over a period of time. It can be savings, investments, or spending targets.

Here’s how you can begin setting financial goals for yourself this year.

Be honest about what matters to you

It is very easy to go on Instagram and compare yourself to your peers and want the same things they have. Be it going to Diani on a fancy holiday or buying the latest iPhone, Insta-envy is very real. However, is this really what you want? Do you care about what phone you have or do you just want an iPhone to impress your friends?

The first thing to remember when setting financial goals is that the goals should be in line with what you want in life, not what everyone else has. Be very honest with yourself about what really matters to you and write it down.

It is also important to think about the why and not just the what. What we mean is, think about why you want to achieve the goals that you have written down. Why do you want that house in Nyeri? Why do you want to build an emergency fund? This will really help you consider the motivations behind your goals and determine what is important to you.

Break them down into short, medium, and long-term goals

Once you have a good understanding of your goals, put a timeline to them. Are the goals short-term (to be achieved within the next year), medium-term (3-5 years), or long-term (5 years+)?

This will help you better assess how long you have to achieve them.

Make sure your goals are SMART

You may have heard of SMART goals when setting career goals for yourself, but it applies to financial goals as well. SMART goals are:

Source: Toolshero

Don’t just say, I want to build a house, Be specific about where you want to build, how much that will cost you, and how long it will take you to save money to build the house. Also, be realistic about it. Don’t set goals that are out of your reach- be honest about your financial situation and what you can realistically afford.

Ensure your goals and budget go hand in hand

Firstly, if you don’t have a budget, make one. We have put together a nifty guide on how to create a rock-solid budget to help you with this.

Once you have a budget, review it and assess if our budget complements your goals. If you are only saving 30K a month, buying property in Nairobi at the end of the year is close to impossible. What do you need to do to be on track?

Maybe you need to make some lifestyle changes. Maybe you need to move your money from a savings account to somewhere it can earn interest. Koa is a great way to start. All you have to do is download the Koa app on your smartphone and create an account with us. Once you are verified, you can start depositing money into your Koa account directly from your M-PESA. Your money will earn an interest of up to 10% per annum without you having to do much about it.

Track your progress

No financial planning list is complete without this. It is very very very important to keep track of how you are doing. Are you on track to achieving your goals? If not, what do you need to do to get there?

Are your investments giving you the returns that you expected? If not, how can you diversify your investment portfolio to make up for the difference?

Are you spending too much and not saving enough? If yes, what can you cut out or tone down to manage your expenditures better?Make sure your goals don’t live in silos. Everything that you do directly impacts whether or not you will achieve your goals, hence always keep them at the forefront of your financial decisions.

And lastly, people change and it is important to recognize that. What you want today may be very different than what you may want 5 years down the road. So, keep revisiting your goals and make changes to them over time. Nothing is set in stone, and your goals shouldn’t be too. Just go through these five steps every time you review your goals and you will be on the right path to success!