Most people are aware of the need to save some of their income after paying bills and spending on non-essentials. Yet, for some reason, we rarely try to figure out why we’re saving, or what we want to do with the money we build up.
It’s important to set goals to achieve your financial dreams to keep you motivated and give your saving a focus. Being able to visualise concrete targets gives you a reason to keep that saving going consistently.
Once you’ve done it for the first time, setting and maintaining your goals for the future becomes second nature. It’s best to get started early so you have plenty of time to prepare a financial strategy that lets you achieve your objectives.
After all, as the old adage goes: if you fail to plan then you are planning to fail.
Start by making a budget – and don’t forget to constantly update it
A budget may seem overly simple, but it’s actually one of the best tools available to you to make the most of your money. By starting with a budget, you’ll be able to see exactly how much money you spend each month and year.
Make your budget as complete as possible by listing every stream of income you have, including any investments. Next, consider all your outgoings and list these too. Everything counts here, from everyday bills such as food shopping to bigger one-off payments such as car insurance.
Remember to include your non-essential purchases too, such as takeaway food, clothes shopping, and TV subscriptions.
Looking at your total income against your outgoings will give you a comprehensive picture of where your money goes each month. You may even see opportunities where you can cut down unnecessary spending.
If you’re struggling to think of everything you might need to include in a budget, the Money Advice Service has a great budget planner on their website. The planner asks you about all your income and spending and then calculates how much you have left afterwards.
One thing many people don’t think about with their budget is that it changes and grows with you. Your budget doesn’t have to be a fixed thing; if your income or outgoings change, make sure you update your budget plan. That way, it will always accurately represent your financial situation.
Think about what your goals are
Once you’ve made your budget, start thinking about what you actually want to achieve with your money.
Everyone has different priorities for their money, so this will be personal to you.
You may have big life dreams, such as using your retirement fund to relocate to a different country. Or you may have more modest ambitions, planning on going on a few holidays a year while maintaining your current life. It could even be as small as wanting to live debt free.
The sooner you work out what you want to do, the sooner you can start putting plans in place to achieve these goals.
Set deadlines for your goals
Remember to set yourself deadlines for when you want to achieve your goals, too.
Establishing milestones could act as the motivation you need to keep working towards them.
A great way to make this feel less daunting is to divide these deadlines into three categories: short, medium, and long term.
This can include anything you’d like to achieve within a few weeks to a couple of months. It could be building up your emergency fund or trying to get rid of small debts such as credit cards.
It could even be as small as trying to get your money to fit into your budget. Keep these goals small and achievable in the near future.
Medium-term goals will typically take you between one to five years to complete. This includes slightly longer savings goals such as for a holiday, and also paying off longer loans such as for a car, or perhaps student loans.
Long-term goals could take anywhere from five to forty years. This includes paying off your mortgage, as well as what your plans are for retirement.
Setting your long-term goals early is important as you’ll likely need to leave yourself more time to achieve them.
You can update or change your goals based on your life experiences
As your life changes, it’s entirely possible that your goals may change too.
For example, if you need to use your emergency fund for an unforeseen expenditure, it’s not a problem – that’s exactly what it’s there for. Just remember to update your budget and adjust your savings targets accordingly.
This is true of long-term goals, too. You may have always planned to go on a cruise around the world when you retire. But, by the time you get to retirement age, you may find that you want to spend more time with your family instead.
There’s nothing stopping you from revising your priorities as your life changes, so don’t be afraid to shift your focus if goals you set yourself years before no longer represent what you want out of life.
Get in touch
At Cordiner Wealth, we can help you work out what you want to achieve with your money. We’ll work with you to create a personalised plan specifically for you. Email firstname.lastname@example.org or call 0113 262 1242.