The start of a new year is a good time to reset – or even set for the first time – your financial goals. It sounds like a great idea, but where does one start? Here are some answers to your questions.
The first thing to understand is that financial goals are unique. Your goals cannot (and should not) be the same as your sister’s or friend’s. Your financial goals depend on your life goals, your current career and financial situation, whether or not you have a family or want one in future, whether or not you need to or want to save for your own or someone else’s education, whether or not you want to own a home, go on holiday, and so on. Do you get the picture? Financial goals are as individual as you are.
The second thing to understand is that persistence and consistency are more important than how many goals you have. The only way to achieve your goals is to keep working at them, and to make habits of the things you must do to achieve your goals. Therefore, don’t try to do everything at once, no matter how motivated you may feel in the first week of January. The secret is to start small and be consistent.
Types of financial goals
Financial goals can be about saving, spending, earning and/or investing. They can also be divided into short-, medium- and/or long-term goals.
Here’s an example of a short-term spending goal: I want to spend 5% less on entertainment during January.
And here is what a long-term saving goals could look like: I want to save R100 000 to put down as a deposit on a house by the end of 2029.
Financial goals are vital to creating a budget. When you have a clear picture of what you’re aiming for, working towards your target is easy. That means that your goals should be measurable, specific and time oriented.
7 examples of financial goals
Here are examples of financial goals to help you set some targets for 2022.
1. Start an emergency fund
Saving for emergencies is one of the only goals that is a necessity. It should be the first one you set, regardless of your situation. It’s up to you to decide what qualifies as an emergency, eg, medical expenses or vehicle repairs. Per definition, an emergency is unexpected and expensive, hence you need emergency funds to keep you out of financial trouble.
2. Pay off debt
Paying off debts is one of the most common financial goals. Because the amount you owe is a specific number, it is easy to translate paying off debt into a financial goal. In addition to making your monthly payments, the best way to get out of debt is to stop borrowing.
3. Save for retirementSaving for retirement is a goal you may be working towards your entire life. It is the perfect example of a long-term investment. The earlier you start, the better off you’ll be in the end.
4. Work towards homeownershipBuying a home is a common long-term financial goal, and one the largest financial targets most people ever aim for. Saving up a sizeable deposit is the best way to get an affordable home loan.
5. Pay off the car
Most vehicle loans have a five-year term, which makes this a medium-term goal. Once you’ve paid off your car, use that monthly instalment to clear other debts or boost your savings. You really don’t need a new car every few years. You can also make it a goal to buy your next car cash, without borrowing at all.
6. Invest in education
Saving for tertiary education is often a long-term goal, and the best time to start is when your children are small. An education nest egg in the bank gives your children options once they finish school.
7. Plan for fun
Always have one “fun” goal, such as a vacation or a big-screen TV. A fun goal is a way to reward yourself for sticking to healthy financial habits, and makes achieving your other goals more pleasurable.
Let’s make 2022 a year of setting goals and achieving them!Go back