New year’s resolutions: How to set and achieve your financial goals

16/01/2017

Most of us have good intentions of starting the new year with a resolution to improve our lives in one way or another. One of the most common resolutions centres around the setting and achieving of financial goals. These resolutions include increasing your savings amounts, obtaining a higher return from your investments or looking to purchase new assets. All too often, however, these remain empty resolutions/ unachieved goals.

So, if you’re motivated to achieve your financial goals in 2017 and want to make the new year a memorable one, we suggest following our seven step guide to establishing goals and achieving financial success.

Step 1 - Motivation

Begin by identifying what motivates you and defining your goals. Ask yourself, ‘what do I want to achieve?’ and ‘why do I want to achieve it?'. By understanding what motivates us, it allows us to rationalise the importance of setting each goal. By identifying the importance of our goals, we are then better placed to identify strategies and plans to achieve them.

Step 2 - Brainstorm

Brainstorm what your goals are. You can start by noting down your ‘front of mind’ goals, then continuing to develop your list in greater detail. You may find that some of your goals overlap and are dependent upon each other, affecting the way you plan for financial success.

Some examples of goals may include:

  • Saving funds for a yearly holiday or one-off trip;

  • Paying down your debt or removing any financial restriction you may currently have;

  • The purchasing of a new home or investment property; or

  • Saving for your retirement or having financial certainty and confidence in your retirement.

Your local adviser can help to map out this process in detail, including helping to define your goals and developing a succinct plan to achieve them.

Step 3 - Consolidate

It is important to review your goals and try to consolidate your list down to small, medium and large goals. This consolidation could be based on time, value or importance.

When identifying your goals, look for connections between them. For example, your two goals may be:

  • Accelerate your debt reduction; and

  • Become debt free.

Goal one is small in this example, while goal two has the potential to be very large. They are not mutually exclusive, but instead are both linked to achieving your success.

Step 4 - Set SMART goals

A major step towards achieving your goals is to make them SMART. Make them: Specific, Measurable, Achievable, Realistic and Time-based.

Here are a few examples of what we mean by setting SMART goals using our consolidation methodology of small, medium and large goal setting:

  • Large goal - I want to go to Europe in three years and spend $15,000 on a holiday.

  • Medium goal - I want to save $5,000 every 12 months with a focus towards saving for my Europe holiday in three years.

  • Small goal - I want to direct $96 per week or $384 per month to my annual holiday savings budget of $5,000.

OR

  • Large goal - I want to secure my financial freedom for retirement, at age 65, with an annual income of $60,000.

  • Small goal - I want to direct $10,000 per year or $833 per month extra into super each year or going forward, between now and retirement.

Setting smaller goals and periodically achieving them will keep you focused on your bigger goals. Remember to always celebrate the wins, no matter their size.

Step 5 - Budget! Budget! Budget!

Budgeting is essential in not only creating, but also achieving your financial goals, as it is one of the only ways you can control your expenditure. Your adviser can provide you with an assortment of tools - if you are having difficulty selecting one – designed to ensure you achieve your budgeting goals.

Step 6 - Prioritise

One of the most important factors to financial goal setting and achievement is prioritisation. Often change will be required to achieve each goal, so it’s critical to ask yourself, ‘How important to me is each of my set goals?’. You may even wish to place a value upon each from one to ten.

Doing this will allow you to:

  • Remain focused on your desired goals, and remember why they are important to you; and

  • Understand why a specific goal may be more important than the others.

Remember you may need to forego current satisfaction for future gain (e.g. receiving a little less income now, so that you have more in retirement).

Step 7 - Seek Help

Last but not least, utilise the resources around you.

Everyone benefits from a financial goal ‘buddy’ and your financial adviser can help tease out these goals, support you in setting SMART goals, helping you to develop your strengths, hold you to account and celebrate your wins!

So, what are you waiting for? It’s not too late to make a new year’s resolution to set and achieve your financial goals. Call your financial adviser today and ask them for assistance.