Thread by @RookieKE

We are halfway through the year, how are you doing on your financial goals?
Tomorrow at 9am, our #52WeekChallenge mid-year chat is about that. #Goals

In 30 minutes, we discuss financial goals. What's the difference between financial:
- Plans
- Goals
- Dreams
- Wishes

Hey guys, we are about to start the mid-year #52WeekChallenge twitter chat. Who is present?

It's a cold morning in Nairobi, perfect for a hot beverage and Twitter 😂

First, I am told that earlier this week we got to the middle of the year. How are we doing on our #52WeekChallenge saving journey?

My calendar tells me that we just finished Week 26 of the #52WeekChallenge. The 50 bob savers should now have 17,550 bob, the 100 bob savers twice that, and the 500 bob savers should be at 175,500.

For the 3rd year now, the #52WeekChallenge has taught us how to set a yearly goal and work towards it, today I want to do a short thread on how to translate this to all our other financial goals.

First, financial goals do not stand by themselves, they are closely linked to life goals. How we spend our money to a large extent determines the quality of lives we live.

So when setting goals, we start by reflecting on whether these goals are truly linked to the kind of life we want to live and the things we find meaningful.

Why? Because all our lives, we have been told adulthood looks a certain way in Kenya I'm told it's:
1 spouse
2 kids
3 bedroomed house
4 wheel drive car
It's therefore not surprising that for many, owning/building a house is the mark of adulthood

And it doesn't have to be that grand. For many of us, adulthood = moving out of home, and moving to a bigger house/better neighbourhood with each pay rise.

Why is this a thing?

And I'm not saying that these things are wrong. My point is that your goals should be well considered. What does owning a house do for you? Why move out of home? Does it improve the quality of your life?

Where a goal involves spending substantially, you have to ask, are there cheaper ways of achieving what this goal will do for me?

E.g many who are privileged to have parents in the city move out to experience freedom.

Would an adult conversation where you pay some of the bills for the folks in exchange for some autonomy get you freedom?
How about renting their SQ?

So we've got that out of the way:
1. Goals have to be as a result of honest reflection. Do they have real meaning for me? Are they going to make my life better? Is it a "me thing", or a "society thing"?

2. I like the S*M*A*R*T acronym when it comes to setting financial goals.
Specific
Measurable
Achievable / attainable
Realistic
Time bound

2 (a) Specific: You should have as much clarity about your goals as possible. "I want to go on vacation in December" is a goal that is not specific enough. Where do you want to vacation? How much will it cost? What are the steps leading up to your vacation?

(b) Measurable: Attach a figure to it. Here's how to make a future goal measurable:
- Establish how much it costs today
- Use a compounding calculator to apply a long-term inflation rate (about 7% if you're in Kenya)
moneychimp.com/calculator/com…

E.g if private university costs 2 million today, in 15 years it will cost an estimated 5.5 million shillings.

Of course this isn't an exact science, but it gives you something to work with.

(c) Achievable / attainable. Once you have your figure above, divide it by the months you have remaining. Is it achievable? If not, you can either reduce the goal or put in place a plan to increase your income.

This is where goal setting meets planning. Once you have your monthly figure(s), you then put in place a plan to set aside that money every month, and an investment plan to make that money work for you.

(d) Realistic. This is what differentiates a goal from a wish. Oprah bought a plane after a fan harassed her at the airport. How nice. I wish I could buy a plane. Can I realistically do so? Nope.

(e) Finally, Time Bound. This differentiates a goal from "hope". "I hope to go back to school some day" is different from "I am going back to school next year".
Put a date to your goals.

Goals can be:
- Short term - 1 year or less, like our #52WeekChallenge
- Medium term - Take 2-5 years to achieve
- Long term - Huko 7-20 years.

Over the last 2 years, I have been helping people plan their finances and set goals, and this is what I have learnt/observed.

We have a tendency to not think about our long-term goals, because often they look too big. In actual fact, it takes less than we imagine to achieve them, because time is on our side. The earlier we start, the better.

To close, I'll use a practical example to show why you should start as early as possible. Let's work with 2 retirement saving scenarios:
1. You start saving 5,000 bob a month at 25, then you stop when you turn 30.
2. You start saving 5,000 bob a month at 30, then you stop at 35

If in both cases the savings are invested at 12% per year. If both people retire at 60, how big will the difference in their retirement nest eggs be?
Less than 1 million? More than 5 million? About 2 million?

At retirement, the one who started at 25 years old and stopped at 30 will have about 11.4 million shillings saved up. The one who started at 30 and stopped at 35 will have 6.4 million. What about at 40? 3.6 million bob.

Start today.

Finally, the #52WeekChallenge remains the one great thing you can do in 2018. Start today rookie-manager.com/52weekchalleng…