It’s the beginning of a new year and there is a lot to be achieved over the next 12 months. When looking ahead, it’s important to factor in financial matters. Just as many of us start a new year with the determination to lead a healthier life by overhauling our diet, we should also be overhauling our finances with the goal to achieve a healthier, more positive financial situation.
Before you start planning ways to spend your next salary deposit, have a look at the following steps that will help you set and achieve your financial goals.
Financial goals are different for every person. Your goals might also change as you grow older or become more financially stable. One person might dream about buying a modern double-storey house, while the next person wants to get through the month without having to stress about money.
The very first step in financial goal-setting is to write down your goals, but write it down in a SMART way:
Define clearly what your goal is. “I want to get rich” is not a goal. Define what “rich” means to you. For example: ‘I want to buy my first house’.
Set smaller milestones that you will be able to measure. For example: ‘I want to save-up the deposit by the end of this year’.
Dream big but be realistic. Your goal must be achievable to keep you motivated. For example: Maybe your ideal home is a double-storey home with a big garden and a swimming pool, but maybe you won’t be able to afford it in the given time. Then you should maybe first invest in a townhouse and upgrade to your ideal home later or when you earn more money.
It should be relevant to you; what is your personal financial goal. There is no point in making the
neighbour’s goal your goal.
Set timelines by when you want to achieve what. For example: ‘I want to save-up a deposit to buy
my first house by the end of this year and buy my new house in two years’ time when I have enough money to pay for the transfer costs as well’.
It’s a good idea to review your retirement annuity contributions, as well as your life cover and other insurance products that are deducted off your account every month. Perhaps there is a better deal that you are missing out on, or a way you can update your policy online to ensure it’s in line with your current situation. These should all be factored into your new financial plan.
Your net worth is your assets minus your debt. Knowing this will help you understand how you are doing financially. The most basic way to do this is to write down what you own – cars, property, jewellery, investments and the money in your accounts – to get a final approximate amount. Then list your debt and subtract from the first amount.
Drawing up a simple budget that tracks your income, fixed expenses and changing expenses will help you map out what you can save and what you can put into debt, or just help you stay on track to meet your financial goals. If you don’t already have a budget, click on the link to download our budget planner template, alternatively there are a number of useful apps that can help you get started. If you already have one, then relook it for the new year and tweak according to your new goals.
A financial calendar is basically a monthly review and outline of payments due, expected income and events to remember that will impact your budget. Plan time in your diary to sit down once a month with your financial calendar and check where you are and how your budget is doing. This is a good habit to get into and will help you stick to the ultimate plan.