How to look forward to what you want to accomplish
When was the last time you wrote down your goals? More importantly, when was the last time you revisited them?
A new year can be seen as a fresh start and a marker to look forward to what you want to accomplish – personally, professionally and hopefully financially. Maybe you have already thought, ‘This is the year I must start contributing more to my retirement,’ or, ‘This is the year I’m finally going to say goodbye to credit card debt.’
Regardless of what life stage you are in, the start of a new year is the perfect time to take stock of your financial plans and to ensure that you have the right goals and strategies in place to achieve them. Remember the old adage, ‘People don’t plan to fail, but they do fail to plan.’
Tangible and realistic
You are likely to have short-term, mid-term and long-term personal financial goals. The key to ultimately achieving them is to set tangible and realistic goals and to follow them, and tracking your progress is essential to obtain your financial goals this year and beyond.
If you are married, you and your spouse or registered civil partner should both share the same financial goals. Otherwise, achieving them is almost impossible. Developing your financial plans together and reviewing your progress together to make sure both of you are contributing to the same goals is essential.
Determining what short-term, mid-term and long-term personal financial goals you have is the first step. This could be building an emergency savings fund, buying a new or second property, accumulating funds for your children’s schooling and further education, or building an investment portfolio and saving for your retirement.
Once you and your spouse have agreed on your target objectives, the next step is to determine a good estimate for how much money you’ll need for each of them. To obtain a clear understanding of the amounts involved and the options available to achieve these requires professional financial advice.
For example, if you are saving for higher education for your children, what percentage do you want to pay? Also, do you want to pay for a state school or a private school education? Retirement savings needs depend greatly on the lifestyle you plan to lead once you are retired, as well as when you plan to retire.
There are a number of factors you need to consider before deciding on what kind of approach is most suitable for you. These include the purpose of the investment, the length of time your money can be tied up for and your attitude to risk.
It’s also important to prioritise each of your personal financial goals in order of importance and then determine how long you have to save or invest for each of them. Retirement could be many years away, but your short-term goals could be in a year or two. You then need to estimate how much interest or capital gains you’ll expect to see where you are saving or investing your money. While capital gains are never guaranteed, you can use an estimated average for these purposes to arrive at target figures.
A mistake some people also make is that once their plans are in place, they forget to look at them again or not as frequently as they should. It’s important to continue to refine your plans going forward and use these reviews to allocate any other amounts you may receive, for example, from bonuses or inheritances. Realistically, will you really be able to accomplish everything? Probably not. You never know what could come up, but ‘you’ll always miss the shots you don’t take’. Think of your financial goals like that.