Forward thinking: financial goals

30 Sep 2019 4 min read

When we have a fitness goal in mind, we generally know what we need to do to achieve it. Whether it’s avoiding the monthly office birthday cake or working out four times a week, we can usually identify what we need to give up and what we need to commit to. When it comes to managing our money, the principles are the same. We set goals that help us stay on track and remember why we’re avoiding the temptation of instant gratification.

The first step for creating achievable financial goals is to work out the current state of your finances, by mapping out your assets and liabilities. It’s a good idea to go back over your last few bank and credit card statements and look at what you’ve actually spent your money on. You can also use tools such as the asset stocktake calculator and net worth calculator on the ASIC Money Smart website.

Seeing the reality in black and white can be scary – but you’re not alone. Deline Jacovides1, Financial Planner at NGS Super, often finds that clients just aren’t aware of how much they are spending.

“People can’t believe how much they are spending on takeaway food or clothes … and it often leads to a tightening of the spending belt.”

Why your money mindset matters

For Jacovides, once the money mindset is right, any goals you set for yourself will start to seem more attainable.

“Building wealth is not about how much money you earn; it’s about how much you spend. Many people think you need to earn more money to be wealthy, but if you can control your spending then you can still build wealth and save.”

Having different financial goals with different time frames is essential to stay on track. If you just had the one goal of being financially independent in retirement, then it would be almost impossible to stay on track – it’s too far into the future, and too difficult to see what you’re achieving along the way.

Short, medium and long-term goals

“Being able to differentiate between your short, medium, and long-term goals not only allows you to stay on track, but means you can live life in-between as well,” Jacovides says.

There’s no formal definition for short, medium and long-term goals, but a good guide is 1-4 years for short-term, 5-9 years for medium-term and 10+ years for long-term.

The time frame of a financial goal will influence how you choose to save or invest your money. If you have a short timeframe you might keep your savings in lower risk assets like a bank account or term deposit. If you have a longer timeframe you might choose riskier assets like shares – the idea being that you have time to ride out any potential negative movements in markets.

Reviewing your goals

Taking the time to review your goals is just as important as setting them in the first place, giving you the opportunity to reassess your priorities. How has your life changed and how does that affect your goals? Try to look at your financial plan once a year or so – tax time can be a good reminder.

Top tips for goal setting

Ready to put theory into action? Here are our top four tips:

  1. Be realistic – It’s great to have aspirational goals, but it is critical that they are achievable for your current financial circumstances. When you have a big goal in mind, work backwards to map out how you can reach it and then adjust the goal as needed.
  2. Learn from your mistakes – Mistakes happen and almost everyone will fall off their savings bandwagon occasionally. What’s most important is getting back on track. Acknowledge what went wrong, make any required changes and then get back to working towards your goals.
  3. Talk to those around you – Money shouldn’t be a taboo or awkward topic between friends and family. Understanding each other’s ambitions and personal financial goals is a great way to pick up new tips and tricks.
  4. Never stop learning – As well as talking to family and friends, try podcasts (like The Money Café or The Pineapple Project), books and even Instagram hashtags. We all know about fitspo hashtags, but take a look at #debtfreecommunity, #financialfreedom and #frugal for some serious financial inspo.

1 Deline Jacovides is employed by NGS Super Pty Ltd and is also an Authorised Representative (1240373) of Guideway Financial Services Pty Ltd (“Guideway”) ABN 46 156 498 538, AFSL 420 367 and provides advice under the Guideway AFSL.

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