This week we share with you a great article to help you set your goals. What we like most about this article is its practicality, helping you 'get back to basics' on setting and, most importantly, achieving your goals!
So: What are your goals...and how soon can you reach them?The first step towards a secure financial future is setting goals. Here's a simple guide to get you started;
In the words of the Spice Girls, tell me what you want, what you really really want. However, financial goal setting is not just about understanding what you want, you need a hierarchy of goals and to be able to understand how they fit together in your life. You’ll need clear short -, medium and long-term goals to overcome the temptation to simply spend what you earn when you earn it. Whatever the timeframe, repaying debt puts you in the realm of financial geniuses. When you’re in the red and paying interest, compounding is working against you. Ditching debt gives you a risk-free, tax-free effective return equal to your interest rate. The best approach to goal setting is to understand how to chip away at debt, save where you can and prioritise what you want over the short, medium and longer terms.
In the shorter term – one to two years
Think fun! A holiday in Thailand next year, or a longer, more expensive sojourn the following year. A new couch, maybe even a new kitchen. These are the sorts of goals you should be focusing on in this period. The relatively instant pay-offs. These are beautiful money targets because they make you feel you are really achieving something. Whatever you do, never use credit for something experiential for which you’ll have nothing to show afterwards but photos. Also cast your mind towards the future: pay off a credit card without forking out a fortune in interest or clear that car loan years early.
In the medium term- three to five years
In this period, your car might need replacing. Plan this far ahead and rather than borrowing for what is one of the worst investments, ay cash. Put aside $140 a fortnight in a top savings account and in five years you could have $20,000 cash to buy a car. The alternative is borrowing $20,000 to buy a car then paying about $27,000 including inters for it over the next five years, or $205 a fortnight. In this timeframe you might also like a new kitchen. Same deal.
In the longer term – five years +
The ultimate goal for all of us should be to retire with no personal or non-investment debt. The other Holy Grail is a big enough asset base – super, a separate share portfolio or property, for example – to generate an income adequate o replay your salary (or the recommended two-thirds of it).
Now set your goals
List your money goals in the table opposite. Set a date you’d like to achieve each one, estimate what it will cost and how many pays until your target date (if the date is five years away and you are paid fortnightly, multiply fix 2 26). Then divide the cost by the number of pays to find the amount to put aside each pay.
Source of article: As published by moneytalk in their Magazine Edition 3 titled "The really simple guide to money", pg 60 and 61.
Source of image: http://www.viraheinz.pitt.edu/content/goals
For a confidential discussion with a financial adviser about your financial goals and circumstances, please contact us on 03 9935 5233 to set an appointment at our offices in Normanby Chambers, 430 Little Collins Street in Melbourne CBD.
This information may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant project disclosure statement before making any decision to purchase that financial product.