Year end, or a new financial year is the perfect time to consider your financial goals for the next 12 months, and beyond. At the end of the financial year you might also know if you’re getting a bonus at work, or a pay rise, which can also be a great trigger in deciding how you might spend or save this additional money.
Your financial goals could be short term (upgrade your smartphone), medium term (head off on an overseas holiday this year), or longer term (save for a house deposit and purchase a house in the next three years). No matter your goals, big or small, having healthy budgeting and spending habits can ensure you always know your financial position, and will enable you to reach those big goals, sooner.
Once you have a clear idea of your savings each pay period, it’s time to tackle your financial goals – what will you use your surplus for each month? Check out our recent article on budgeting tips if you need to action this first: New Financial Year – Set or Review Your Household Budget
A budget clearly outlines your costs, ensures your hard earned income pays your expenses, and hopefully sets some money aside to pay down debt or add to your savings and investment account. Financial goals however, ensure that you have a vision and timeline for the future – when you want to pay off your debt, or how long it might take you to save for that house deposit or new car.
There is plenty of online support for helping you set your financial goals. Common rules of thumb are to:
For some, having a 12 month plan can be more manageable, but typically, people set 5 year financial goals. This enables you to consider short term and medium term financial goals, but may also get you thinking about long term goals (10 years and more).
These goals are often within a 0-3 year timeframe. They will include getting on top of debt (such as unpaid credit cards, After Pay and hire purchases). They may also include saving for an upgrade to your current vehicle or an overseas holiday. These types of goals are some of the most common as the shorter timeframes make them feel manageable and achievable.
Be clear about how much you’ll need to pay or put outside each month to achieve these goals, and when you expect them to be achieved. Don’t forget about setting aside a portion of money as a rainy day fund too – for those unexpected expenses that do come up from time to time.
These goals typically have a 4-9 year timeframe. Types of debt that might fall into this category may include the repayment of vehicle finance, student loans or paying down the last of your mortgage.
Typical savings goals may include once in a lifetime family holidays, house deposits, or a renovation.
The timeframes for these goals can feel like they’re less achievable, but by having a clear monthly plan, a firm target and end date, you can bring your goal to life with a solid action plan.
Thinking ahead 10+ years can be a struggle for those who are less organised. Depending on your lifestage, obvious long term goals often centre around retirement, paying off a home loan, purchasing a rental property or significant travel. People may only have one or two of these at any one time, and the amount they channel into these goals could be very little. Depending on your savings or investment strategy though, savings that focus on “little but often” can really add up over time with compound interest.
The key to achieving your financial goals is to visualise them, and track your progress. Seeing yourself slowly make progress can be hugely satisfying and motivating. There are online financial goal trackers available to help you do this, and regular check-ins with your partner or family can help to keep everyone across progress and help to plan ways to fast track those goals too. You can fast track your financial goals by channelling work bonuses, pay rises or inheritances into your financial goals. Who doesn’t like meeting their goals early?
Regular reviews of your financial goals can increase motivation to meet them, and agree on whether you’d rather replace a financial goal with something else. For couples, financial goals may evolve as they start a family – prioritising a new car over renovating a new bedroom for a baby may not make sense if your baby’s due date is looming!
We recommend reviewing your financial goals every 6-12 months, but do check in your progress more regularly, and celebrate those goals when you reach them!
If your short term financial goals have you focusing on multiple debts to repay, then taking out a personal loan to consolidate your debts can be really helpful. If you’re clear on the amounts you need to repay and your current interest rates, you can investigate whether taking out a personal loan to cover the total value of your debts, may be a cheaper alternative to paying down your debts. High interest debts such as credit cards and payday lenders, can be repaid by using a personal loan as a debt consolidation tool. You’ll also want to check any early repayment penalties you may incur by consolidating your debts.
If you’re unsure of the best approach, there is free financial planning advice available online.
Do you have debts that need consolidating? Check out how much you could borrow and learn more about our debt consolidation loans. You can get started with Nectar and get a personalised loan quote online which will include your interest rate, maximum borrowing amount and repayment options. Borrow better, faster today!*
*Nectar’s lending criteria and responsible lending checks apply.
