Back in January, we decided to replace our New Year's Resolutions with goals. Since goals can change from time to time, we thought now might be a good time for a quick refresher course in how to set them - and make sure you achieve them!
What are financial goals?
We can all think of things that we want, but not all of these things can be translated into clear financial goals. Some of your goals will be short term and specific, like aiming to go on holiday abroad next year, while others will be further ahead like securing a comfortable retirement. It’s never too early to start planning to reach your goal, however distant it may be. To get a clear picture of your goals, it can be a good idea to sit down and think through them, dividing them up into short and long term, and into “needs” and “wants”.
What makes a good goal?
For your goals to stand the best chance of success, they should :
- Be specific - it’s easier to work towards something if you know exactly what it is. For example, it would be difficult to measure your progress against a goal like “I want to have more money”
- Be realistic - if you aim higher than you can possibly reach, you will set yourself up to fail
- Have a time frame - there’s nothing like a deadline to motivate you! But don’t be too hard on yourself if you miss your target date slightly, the main thing is that you reach your goal in the end
Working towards your goal
Know your situation
The first step is to know where you’re starting from: make sure that you fully understand your current financial situation by assessing your income and outgoings.
When you know how much you have to spare, you can prioritise your goals. It may be that you can’t afford to contribute to all your goals at once, so think about which ones you need to achieve first. For example you may want to try and clear expensive debts before you start saving for something new.
Decide how to reach your goals
For each goal, you will need to decide what action needs to be taken. For example, do you want to save using your cash ISA allowance, or would you prefer to invest? Some goals may not need you to contribute any money - for example if you already have a pension plan in place, the next step to achieving your retirement goal may be to review your current pension scheme and research other options.
If you do decide to contribute a set amount of cash towards your goal each month, you could set up a direct debit into your savings account to make sure it gets done. If you are investing, check out our beginners guide to investing for steps you may want to take to help you find the style od investing that’s most suited to you.
Make sure that you are saving or investing as tax-efficiently as possible, and getting the best rates that you can. For example, it is a good idea to ensure that you’re using up your annual ISA allowance, and that you have considered tax wrappers for your investments such as pension schemes - although the suitability of different products and wrappers will depend on the nature of your specific goals.
Remember that it’s important to review your progress regularly to make sure you’re on track, and getting the best deal possible.
Once you understand the basic principles, setting and achieving your goals can be easy. So why not get started today and see what you and your money can do?