The people who do best with money are those who have goals. After decades of working as a financial adviser and advising hundreds of families, my experience is that people who know where they are going are more likely to get there.

I no longer work as a financial adviser and, looking back at my career and the people I have helped, I know that setting goals works.

“I have a goal: get rich!”

Sometimes people think that they have goals: “I want to be wealthy” or, perhaps, “I’m planning to get rid of the mortgage a bit faster”. In their minds, these are sort of nice-to-haves, things that you might think about one day. However, there is nothing defined about them – and, as such, there is no commitment. They are little better than wishful thinking.

Instead, you should get smart and define what you want and when you want it. There is a well-worn path for this, and that path takes the form of SMARTI goals. SMARTI goals are ones that are Specific, Measurable, Achievable. Relevant, Time Bound and In Writing:

• Specific – you know exactly what the goal is (it will probably be a number – for example, we will have a mortgage-free house and $1m of savings in 2035)
• Measurable – you will know whether you have achieved it or not
• Achievable – you have a means of achieving it (i.e. it may be a stretch, but it should not be pie in the sky)
• Relevant – it is something that is important to you and your life
• Time bound – you are able to give a time for when it will be achieved
• In writing – you have written it down in a way that you cannot fudge

Goals drive commitment

Having a goal that is clearly defined like this drives commitment. You cannot fudge a goal that is so definite, you cannot waffle about whether you have achieved it: a goal which is SMARTI is either achieved (success) or not achieved (failure). And by putting it in writing with a time for when you will achieve it means that you will have a high level of commitment. As such, you are most likely to achieve it.

I am greatly in favour of goals like this – time and again I have seen that people who commit to goals achieve them.

I think this is most important for your Freedom Figure. Your Freedom Figure is the amount of money that you would need to have the life of your dreams. It’s the amount that would give you freedom to work less and live more, and, maybe, retire.

When I worked as a financial adviser, my practice often involved a discussion with clients so that I could calculate their Freedom Figure. This is because an honest discussion on what you want and how you want to live in the future breaks new ground for a lot of people – getting out of the daily drivel to have such a discussion about what we want to do with our lives is rare.

What’s your Freedom Figure?

Money in itself is not important – it is the way money gives you lifestyle that is the critical thing. The trick is to think about your future lifestyle and then set a goal for how you will resource it.

To find your Freedom Figure, first you have to make some choices about what you want your life to look like in the future.

• Where do you want to live?
• What do you want to do?
• What do you want to have?
• What, if any, work will you do?

These are all important questions – and you cannot hope to work out how much money you will need if you are not very clear on lifestyle questions. Money resources lifestyle; decide how you want to live and then you can set your Freedom Figure.

The younger you are, the bigger you can dream

For most people the Freedom Figure will be quite a large number – perhaps a mortgage-free house and $1m or more. This may seem impossible and, for older people who have made only a little financial progress, it may indeed be impossible. You may not be able to achieve a fantasy lifestyle in a few years; you’ll need to be realistic with your Freedom Figure.

However, younger people can (and should) be quite ambitious. If you have 30 or 40 years to build wealth, you bring the wonder of compound interest into play. That may build wealth much faster than you imagine.

Whether it is for your house deposit or, further off, for your Freedom Figure, get yourself a goal. It should be a big goal, one that is concrete and definitive. Write it down so that you cannot wriggle out of it, and keep it somewhere so that you can see it often.

That goal should give purpose to your investment and money management. Commit to it and your older self will be very glad you did.

The information contained in this article is general in nature and is not intended to be personalised financial advice. Before making any financial decisions, you should consult a professional financial adviser. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product.