Every person has certain goals that he/she wants to meet. Some people want to buy a home, while others want to purchase a car. Some pragmatic people want to save up sufficient money so they can live comfortably after retirement. Now, while financial goals may vary from person to person, there is the risk that you may be unable to achieve your goals. A common mistake people make is setting goals that are too ambitious or lofty with regards to their earnings and capacity to save money. In some cases, the circumstances don’t allow them to go through with their plans.
This doesn’t mean that you shouldn’t set financial goals or take each day as it comes. The idea here is to help you reach your financial goals through effective steps that you can follow easily. So, without further ado, here are a few tips for reaching your financial goals:
Failure to plan is planning to fail when it comes to your financial goals. You cannot just say that I want to save a million dollars by the age of 50. You have to think of a feasible plan that you can follow to reach that number. There are several factors that you have to consider when coming up with a plan. First and foremost is the amount of money you want to save. The second and equally important factor is the amount of time you have for saving that amount of money. This will enable you to calculate how much money you need to save every month or every year to reach your goal.
Any plan that answers these basic questions will prove effective in the long run. With a viable plan in place, you will be able to track your progress and not have to worry about making changes or cutting corners to save more money. Of course, you need to keep your plan a little flexible, because things can change unexpectedly. That being said, you should try to cover all the bases when coming up with a plan so that you don’t face any major hurdles towards achieving your financial goals.
You may have considered the amount and time factors, but there is another equally important factor that your plan should include: realism. Your plan has to be realistic in order to be achievable. If you plan to save 25% of your salary every month, it is not a realistic plan. In fact, most people making $45,000 a year can save up to 3% of their annual salary. Plus, you have to consider any debts that you have to manage while saving to reach your financial goals. If your plan isn’t realistic, you will eventually end up abandoning it.
Since that is something you cannot afford, it is better to be realistic. An effective way of doing this is setting short-term goals, such as paying off your credit card in a year. This way, you will get an idea of how much money you can spare in a month and when you have handled your debts, you can start saving more.
Set Small Goals
As mentioned above, it is a good idea to start by setting small goals. Your overall financial goals stay in place but you can break them down into smaller chunks. For instance, if you plan to save money to put down a deposit on your home and you need $50,000 in 4 years, you should instead focus on saving $12,500 this year. Break it down further and you will come down to around $250 a week. When you achieve the smaller goals, you get the confidence and the motivation to continue pursuing your long-term goal. Otherwise, there is a risk that you might give up.
Automate the Process
You should automate the process based on your plan. For instance, if you have to transfer $250 a week to your savings account, ask your bank to do it directly, rather than you having to go to the bank. Not only will this reduce the hassle involved in the process, but keep you accountable. The money will be gone by the date you have decided on, and you will have to make do with the remaining amount in your checking account.
Don’t Use Your Savings
This is perhaps the most difficult part of the process. You might be tempted, on occasion, to use the money you have saved for any upcoming expense. For instance, you may have to pay your son’s tuition fee. However, if you tap into your savings, you are compromising your plan. Therefore, it is important that you find a way to keep your money out of reach. For example, you can set up an account where you can only withdraw the money after a certain period, let’s say 5 years. Otherwise, you might be reaching for your ATM card and making withdrawals every time you need some money.
These are some tips you can follow to reach your financial goals. The key is to be consistent, disciplined, and focused. Once you make the commitment, you don’t have the option to renege. So, be mindful of this before you go ahead with this plan.
All you really need to do is make a plan and seek advice from an experienced financial professional and you are good to go. You can make the most of your earnings and support your lifestyle while at the same time building for the future.
If you would like a review of your current Wealth & Investment plan then please contact me on 021 283 5065, or book an appointment on my website https://samkodi.co.nz/contact/.