Set financial goals and create an action plan to help you feel confident that you’re moving in the right direction.
Step 1: Decide what you want
Financial goals are either purchases you want to afford or savings milestones you want to reach. Your goals should change as your life does, flexing to help you afford what you need when you need it most.
Your goal may be affording an overseas holiday, saving for a property or your children’s education. Depending on your situation, you may also need multiple goals, both short and long term.
Step 2: Prioritise what’s most important
If you do have more than one goal, it’s a good idea to order them in terms of importance. What would you like or need to achieve first? You can continue to put money towards all your goals but having your goals prioritised may help you make decisions down the line.
Step 3: Understand the cost of each goal
If your goal is to buy a house in five years or pay for your child’s education in 10 years, you won’t be able to put an exact dollar figure next to your goal, but it is worthwhile estimating so you can get a rough idea of how much you should be saving. Put estimated costs next to each of your goals and diarise a date to go back and reassess the cost of your goal and adjust your savings in line with your new estimate.
Step 4: Set realistic timeframes
When would you like to achieve each goal by? Put the ideal date next to each item. Some goals, like reaching a certain amount in your superannuation, may run for another 20 years. Others like buying a new car may come around sooner but it’s important to be realistic to give yourself the best chance of achieving your goals.
Step 5: Divide your savings across your goals
Now you know how important each goal is to you, how much it will cost and when you would like to achieve it, it’s time to negotiate goal versus goal.
Using the amount you’re realistically able to save each month as a guide, create a breakdown of how much should go towards each goal. Weight your savings towards your priorities or, if some goals have urgent timeframes, you may want to prioritise them.
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