Let’s start with some advice from some financial gurus. “Don’t ignore your finances. It won’t improve your money mindset. In fact, it will just make it much worse!”
Having a financial plan where the ultimate goal is to save money, create an emergency fund, and keeping track of where your money is going, will not only improve the way your feel about money but your entire financial situation whether it’s for the short or long term.
When setting financial goals, think of them as long-term and short-term.
Long-term financial goals
Think about what you want in the long run. Is it to be able to own your home? Provide the best education for your children? Retire earlier?
These are called long-term goals as they may take time to achieve.
Short-term financial goals
These are goals that are quick and easier to achieve over a short period of time. For example, saving up for a summer holiday; buying a car; renovating your home; saving up for your wedding.
How do you set financial goals?
One of the best ways to set a goal is by making it SMART. Here is a worked example for buying a car:
Specific – Pin down exactly what you want to achieve.
“I would like to buy a car by next Summer so that my commute to work is easier.”
Measurable – Think about how much you will need to save each month.
“I will need to save at least £300 every month.”
Actions – Find ways how you will get the money to buy the car.
- “I will put aside £150 from my month’s salary through M for Money’s payroll deduction scheme. I will also put a cap on spending leisurely to £50 per month.”
- “I will open a Savings account with M for Money and any money that I save, I will put it into that account.”
- “If I still don’t have enough by next Summer, I will apply for a loan from M for Money.”
Realistic – make sure that the target amount that you have set for your is achievable in the timescale.
“I hope to save £3,000 by next Summer.”
Timely – when do you hope to achieve your goal? Are there are any major changes that may affect your target amount?
“I am hoping to get my car by 30 August. I will postpone my holiday to the year after.”
After you have set your current goal, you always think about the next one so that you can start planning towards that.
“If I do meet my goal and still have money saved, I will use some of it for a short winter break and save the rest for a holiday the year after next.”
How to achieve your financial goals
Now that you have set your goals, here are some ways to help you achieve them:
1. Spring clean your finances.
This will help you see where you are and what you need to do to get your finances in order. You can read our blog to learn more.
2. Set up a workable budget.
Knowing where your money is coming from and where it’s going will help you make any adjustments to help you achieve your goal. If you haven’t got one as yet, read our blog on how to create one.
3. Keep track of all your expenses.
You can use an app such as the ‘MoneySkills App‘ to do this.
4. Open a savings account and start putting money into it. You can open one with M for Money. Find out more.
5. Switch suppliers for better deals on your bills.
If your service with a supplier is coming to an end, you can shop around for better deals. You can use price comparison sites to see what’s out there and follow up with your existing service provider to negotiate. By shaving a few pounds each month off each bill can add up quickly.
6. Cut down on any unnecessary spending.
Do you go out for a meal every week? If so, make it a monthly treat instead or simply make something delicious at home.
7. Be creative on how you can reduce your expenses.
Think smart with your money so that it goes further. For example:
- If your neighbour works at the same workplace, you can think of carpooling instead of riding alone.
- Make a packed lunch instead of buying one.
- If you are going somewhere local, opt to walk or cycle instead of driving. This way you can cut down on fuel costs.
- Instead of buying baby wipes, simply use some cotton wool and water.
Setting financial goals is essential to financial success. After you have set these goals, you can write them down and create a plan (a roadmap) to realise them. You can even make use of apps such as the MoneySkills App and add your goals there.
By doing this, you will be able to stay focused and get the confidence that you are on the right path.
We hope that our tips will help you set financial goals more efficiently.