What are your financial goals?
Are you well on your way to knocking some of them down? Or is that a problem for future you?
Setting financial goals is an important part of life, just like eating healthy food, exercising and looking after your mental health. When we set financial goals, and our finances are in order and working for us it eliminates a huge stress barrier in our lives. And let’s agree that life is stressful enough without having to worry about finances on top of other stresses!
I was inspired reading P.J. Money at budgets are sexy’s blog A Checklist of 15 Financial Goals to hit and decided I would too, throw together what my own 12 Financial Goals goals and what I would encourage anyone else to aim for!
If you can work towards these goals, no matter what age you are or how long it takes, you are going to set yourself up for a financially successful future.
These are all things that I have done over the past 8 years, ever since I moved out of home. Utilising one pay cheque at a time, to slowly but surely achieve each financial goal I set for myself.
And I can attest that this list of financial goals has helped me to stress less about money and worry less about the future. And whilst doing so I haven’t ever completely deprived myself of enjoying life. I just make sure I’m frugal where I can be, I only buy things that bring me joy and that I have thought about long before I’ve clicked buy or walked into the store.
Here are my top 12 Financial Goals that should be on your agenda so you can set yourself up on a path to financial success and less financial stress.
12 Top Financial Goals That Should Be On Your Agenda
1. Save an Emergency Fund
In the words of ‘I can’t stress this enough people’ guy from the Simpsons, please, please, if you do nothing but this, have an Emergency Fund of at least $2000, ideally 3-6 months of your expenses and don’t touch it for any reason other than actual emergencies.
An emergency is not a European vacation or a shopping spree. It is a buffer between you and all the financial mud that is going to come your way, whether it be the unexpected dental visit you have, needing new tyres on your car or needing to replace your hot water heater. Be kind to future you and prepare!
A great way to jump-start your Emergency Fund is to look around your house and sell any unwanted things to help grow this fund quickly.
With the current economic climate, it has never been more important to have an emergency fund and this is why this is my #1 Top financial goal that should be on your agenda!
2. Pay off all consumer debt; Car loans, Credit cards, medical debt, After or Zip Pay & Student Loans.
Until you say no to going into more debt, you will be stuck in a debt spiral of borrowing and repaying money and the struggle of trying to juggle keep up with those repayments. Even the most confident spender will one day be caught out when they can’t afford their minimum repayments and all the balls their trying to spin in the air drop.
Don’t be that person who gets caught out. Pay off your consumer debt as soon as you can and set yourself a new personal value to stay out of further debt.
The Barefoot Investor says Debt is Compound interest in reverse. So if you want your money to build wealth, you need to start investing in things that make you money, rather than throwing all your hard-earned cash to interest repayments with zero plan to ever pay them out.
Debt is compound interest in reverse – The Barefoot Investor
3. Save up a deposit for a home or pay down your mortgage when you have paid off all consumer debt.
If you don’t have any consumer debt and have an emergency fund of 3 months of expenses (a huge congratulations to you!), now is your opportunity to do one of the following with your freed up cash that used to go to debt repayments:
- Bank your spare money in a high-interest savings account and save up a deposit for your first home. You should be aiming to save 10-20% of your income each month.
- Pay down your mortgage faster.
You should be aiming to save 10-20% of your income each month. If you can’t save that or put something similar to your mortgage, you have two options:
1. Review your budget to see what expenses you can minimise I.e. cancel your cable or any other unnecessary subscriptions, find cheaper mobile plans, consider finding a cheaper place to rent or moving closer to work to save on transport costs. Everything needs to be on the table and you can choose what you are willing to cut and what you aren’t.
2. You need to see how you can increase your income. This could involve getting a better paid job, working towards a pay increase at your current job over the next 6-12 months, up-skilling so you can move up a role, speaking to your partner about returning to work to bring in more cash or helping to encourage and support them to get a better paying job. Or getting creative with side hustles in your spare time and selling your unwanted items to make some extra cash each month.
Between cutting expenses and increasing income, you will hopefully find some new avenues in your budget to start saving up that house deposit or paying down your mortgage faster.
4. Contribute extra to your retirement
In Australia we have the Superannuation Guarantee, which means that if you are an employee over 18 who works over 30 hours, you should be getting paid 11% of your salary into your Superannuation. Luckily for us we already have a nice portion of our wage, going into our retirement account.
The key to building wealth is to start early. If you have the capacity to do so, for example if you are debt free and have money to save, you may want to start topping up your Superannuation (401k or equivalent in your home country). There may be tax incentives for you to contribute to your retirement which is a great bonus. Speak to a financial adviser or your retirement fund to determine what is the appropriate investment decision for you.
Remember, Iit’s never too late to start contributing to your retirement, just remember, the sooner you start, the sooner you can benefit from the effects of compound interest!
5. Track your expenses for 1-3 months
If you have never tracked your expenses, you might have no clarity over what you are spending your money on a month to month basis. Knowing what you spend is the first step in controlling any out of control spending.
If you buy everything on a credit or debit card, this is an easy exercise of downloading all your bank statements into one document. Alternatively, if you are a ‘cash is king’ kind of guy or gal, simply keep a notebook handy every time you spend money over a 12 week period and note down what you spent. If 3 months is too prohibitive, at least do the exercise for one month so you get an idea of where your regular spending falls.
6. Create a Zero-Based Budget
Carrying on from the expenses review, one of the most important financial goals you should now tackle is to create a Zero Based Budget so you can see if you are living within your means and what you are earning Vs. what you are spending. It’s important when planning for your financial future that you know where your finances are at this moment so you can start making decisions about your finances.
The Zero-Based Budget will give you a snapshot of where your budget is and where you might need to reduce spending, or increase saving. To help you get started, you can grab your free Zero Based Budget Worksheet template.
7. Set up automated Savings Transfers
If you have trouble budgeting and saving money, the easiest way to be successful is to set up automated savings transfers. Taking the physical work out of budgeting and savings and constant decision making out makes it much easier to save. And it is important to always ‘pay yourself first’, that is, save some of your money before you pay your bills or spend money on anything else.
Don’t let saving be an afterthought. Set up a regular savings transfer of whatever you can afford out of each pay cheque. Even if it is just $20 a week it will add up, of course, the more you can save the better. And once you get used to the habit of saving and building that savings muscles, it will become easier and easier to add extra money to that regular savings transfer and build up your savings faster.
Don’t forget to put your savings somewhere you won’t be tempted to touch them like a separate high-interest account. And treat the money like it isn’t yours. The more you ‘detach’ from it the harder it will be to spend unnecessarily and be there when you really need it!
8. Set up your Sinking Fund accounts
If you have never heard of Sinking Funds, never fear, I am going to give you the down-low on them, so they too can change your financial future. In my early 20s I was opening some mail, minding my own business when I was hit with an unexpected $1200 vehicle registration and medical insurance (Greenslip) bill. Ouch!
But the truth is, it wasn’t really that unexpected. You see, this bill came at the same time every year and everyone knows well in advance what date their registration is due, it used to be noted on a little sticker on our window screen at the time. Now we are just expected to memorise it in our head, but still. We know when it is coming up.
Somehow it had completely slipped my mind, lets put it down to being in my early 20s and still figuring out life. And so I had to deplete my entire savings account to pay for these two bills and keep my car on the road (and me in a job!). Which left me with $25 to my name. That was a huge scare and I couldn’t be more thankful that it happened to me in my early 20s as that is when I learnt about the magic of Sinking Funds.
If you want one fail-proof system for managing your finances and bills, and not leaving yourself deciding between buying groceries and getting your car on the road like me all those years ago, set up your Sinking Funds.
Simply make a list of all your non-monthly bills or expenses, anything that you can reasonably estimate and get the total for the year. I.e. your annual car insurance bill, clothing, miscellaneous expense etc. And work out the monthly cost.
You want to put that monthly amount away in a separate account where you will pay into each pay check to cover these costs as they come up. Please check out my Sinking Funds post for more information on how to set up your own sinking funds and say goodbye to bill shock forever! 🙂
9. Get your bills direct debited to save you time and automate your finances.
Now that you know your monthly expenses, and have set up your Sinking Fund accounts as mentioned above, you can safely set up your direct debits to come out of your Bills Sinking Fund Account. Set them to come out a day after your pay day so if there are any issues with your pay, you can pause the transfer if need be before it is withdrawn.
Never get a late fee for a bill again. And now you can take ‘pay bills’ off your to-do list and do something more fund instead 🙂
10. Start Reading finance books and getting yourself educated.
It may not be your thing to read finance books, but if you can get through 3 of them, you’ll be able to take in a lot of financial wisdom from some of the best financial experts around!
I suggest; Dave Ramsey’s, Total Money Make Over, The Barefoot Investor by Scott Pape, and Remit Sethi’s I Will Teach You to be Rich as a great place to start with your financial education.
11. Start savings for ‘big things’ you want in life
If you want motivation to get saving, this is it. Pick something that you want to save for that means the world to you. It could be that European holiday you’ve always wanted. Your upcoming wedding. A car upgrade. Your kid’s university education funds, or your first home.
Whatever it is, having those financial goals at the forefront of your mind will help you to save money. Every time you go to spend money on something non-essential ask yourself if that purchase is more important to you than your savings goal. Keep that big savings goal at the forefront of your mind.
When we planned our wedding, we had to ask ourselves this question constantly for 19 months whilst we saved up and planned our debt-free wedding. Sure it involved lots of sacrifices, date nights at home, saying no to seeing some of our favourite band, not having any money to do updates on our house etc, but it was all worth it to come home from our Honeymoon to Europe and not have one single debt repayment to make. And driving a car, or travelling to a new destination is going to be so much more enjoyable when you know that it was a reward for your hard work in saving up for it beforehand.
12. Change your consumer spending habits
As you work towards implementing the above financial goals, it’s important to reassess your spending habits so you can spend in line with your values, rather than just how you always have, such as buying things out of boredom or because they are on sale and you just can’t resist a good sale. I know myself, after years of living out of home I had accumulated a large amount of excess crap that I had wasted who knows how much on and after turning my finances around all that money I had wasted really hit me.
If you have debt or savings goals and want to temporarily boost your income, and make some changes to your spending habits a great way to do that, is to turn your clutter into cash. Kill two birds with one stone, and make it one of your financial goals to declutter your home and make some extra money for your Debt Snowball or savings goals at the same time. And I guarantee, after going through the process of selling your excess stuff, you won’t be able to walk away without changing your consumer habits and spending your money more intentionally. Especially when you have some huge financial goals to achieve that will be more alluring than another pair of shoes.
Photo by Jungwoo Hong on Unsplash
General Advice Dislaimer: The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.
