Setting Your Financial Goals for 2021
2020 has been an incredibly challenging year for us all, and who isn’t looking forward to 2021. Now is a great time to make a plan for your 2021 financial goals.
Here are 4 clear steps to help you create goals for your money…
Step 1. Be clear on what you want to achieve
It’s easier to pick specific goals than a vague ‘get better with money’ kind of approach.
Is it paying down debt, increasing your retirement savings or booking a big holiday? Seeing it in your mind’s eye means you have something to work towards.
Once you have your goal in mind, write it down! And some details, so that instead of saying ‘I’d like to retire comfortably’, you think about what that means. Eating out, going overseas, buying gifts for the grandkids?
Or if you want a holiday, think about the sights, sounds, and places that are on your list. ‘Drink cocktails on a beach in Bali’ sounds more motivating than ‘go somewhere warm’.
Having a big goal also means you can break them into smaller goals.
For example, a goal to put an extra $1000 a month into your super account sounds much less daunting than saying you want to save $12,000 a year or $120,000 over 10 years.
If you’re still having trouble determining your goals, a great tool to use is the SMART framework. It outlines the 5 things that make a goal easier to achieve.
- Specific: Your goal must be well defined. How much do you plan to save or pay off?
- Measurable: How can you track your progress?
- Achievable: Is the goal attainable? How much can you realistically put away each month?
- Relevant: Is the goal worthwhile and consistent with your other goals?
- Time-Bound: When do you plan to achieve it by? Do you have enough time?
Step 2. Prioritise what’s important
It helps to decide which financial goals are the most important to you. If we’re not careful, trying to split our time and resources between too many goals at once can be both overwhelming and disheartening. Try to rank all of your goals, from most to least important.
A good way to prioritise your goals is to ask yourself which goal will have the biggest impact or improvement on your current situation? Which goals are short term and long term?
It might be a dream to own your own home, so you’re saving for a deposit – but you also want to increase your super, pay off some credit card debt and travel with friends at the end of the year.
So, what comes first?
Think about which one is going to have the biggest pay off for you in the long-term. If you’re planning to get a home loan, being in debt will negatively impact how much you can borrow. So, tackling the credit cards may be the best idea – and holiday plans might need to wait.
In this situation, it can help to speak to an adviser to help you work out how to get the best possible result in the long-term.
Step 3. Make a plan!
No goal is ever achieved without a plan in place. We all have the best intentions, but it’s easy to fall ‘off the wagon’. But there are things you can do to take control.
Creating a budget is key. Look at how much you have coming in and going out each month, and where it’s going. You’d be surprised by how much we spend without even thinking, so tracking your spend is a good exercise, even if it’s just for a month or two.
Making a budget is one thing, but sticking to it is another. Learning any new habit takes time and patience, so watch where you’re likely to go off track – whether it’s out on the town, splurging at the shops or being a sucker for an online sale.
Consider creating automatic direct debits into a savings account before you get to spend it. This way you don’t even have to think about putting money away, it’s done automatically for you.
4. Review your goals regularly
It’s crucial to check up on your plan and goals regularly. Life changes all the time, so it’s important that you update your goals to reflect this. Whether you’ve received a new promotion or now have more expenses to meet, you should update your budget to reflect the changes in income or expenses so you can ensure you’re still meeting your goals.
Another tip is to track your progress. Just like weigh-in on a diet can keep you motivated, looking at your progress each month can help you stay on track and see your hard work paying off.
A great way to keep yourself even more accountable is to go through some of your plans and progress with a trusted family member, friend, or financial accountant who can help motivate you and point out areas where you can improve.
In the end, when it comes to you and your financial goals, your biggest asset is yourself. You can have all these different tools and people to help you on your journey, but it’s up to you to do the hard yards.
But when you’ve reached that goal, you’ll know that it’s definitely worth it!
If you need any assistance in planning for your financial goals please don’t hesitate to get in touch.
This article was sourced from our partners at Yellow Brick Road.
