Whether it’s finances or fitness, spending time on setting your goals can reap rewards
When it comes to the big things in life we all have our goals. Getting promoted at work. Educating the kids through school. Saving for a comfortable retirement.
It’s important to aim high. But if the goals you set are overambitious, with no checkpoints along the way, you could be setting yourself up for disappointment. So it may be a good idea to make sure your goals are realistic and achievable.
One area where setting goals can be beneficial is health and fitness—whether it’s losing a few kilos at the gym or aiming for a PB at the next half-marathon.
Think short, medium and long term
Your finances could benefit from the same treatment as your fitness. When you’re saving and investing your money, you need to know what you’re aiming for.
Think about how much you earn and how much you spend. Are there any ways you could cut down your spending to allocate more money towards your goals?
It could also be a good idea to make your goals and timeframes realistic, and set interim targets. Let’s say you’re saving $25,000 for a new car1:
- You could set yourself a realistic short-term target of saving $5 a day by going without a coffee or bringing lunch to work, and set up automatic debits to a high interest savings account.
- You could set a ‘trigger’ amount for the medium term—say $1,000—and when you reach it you could consider rolling your savings into something that may generate higher returns, such as a term deposit or a diversified investment option.
- You could start planning your next long-term challenge once you reach the magic number of $25,000 and achieve your goal—after rewarding yourself, naturally.
And different goals could benefit from different approaches.
When you’re putting money aside for retirement, superannuation could be an effective tax-friendly option to boost your savings, depending on your circumstances.
But with super, your money is locked away until your preservation age. So if you’re looking at achieving a more short-term goal—like saving up to buy a new car—you may need to investigate other options where you could access the savings sooner.
Six steps to creating your financial goal checklist
- Big picture. Think about your overall long-term goal—this may not necessarily be financial but more about how you want to live or how you want your family to live.
- Magic number. Work out how much money you’ll need to achieve your goal.
- Small steps. Look at the incremental steps you need to take to achieve your goal—you may feel more motivated to achieve bigger goals if you set checkpoints along the way.
- Write it down. Try this…just for a second. Close all your apps, put down your smartphone, pick up a pen and paper…and write it down. It’s amazing the effect that putting something down on paper can have on your motivation, especially in a digital age. Sure, you can then get on to your laptop to set up some useful spreadsheets and reminders. But you’ve got a written record to remind you.
- Back on track. Here’s the thing. You might initially fail. As a wise man2 once said, ‘Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.’ While there might be ways you can stop yourself going off piste—such as transferring a set amount to your savings account when your pay cheque comes in—it’s a good idea to work out how you’re going to get back on track when you (inevitably) fall over.
- You deserve it. As humans you can say we’re hardwired to expect a reward. So you might want to treat yourself when you reach your goals—every step along the way.
General Advice Disclosure: This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, AMP Financial Planning and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.