The Basics for Setting SMART Financial Goals
People of any age can benefit from setting smart financial goals. It’s a bit of a myth that planning for your financial future should be left until you’re more financially stable. Setting financial goals and fulfilling them can happen at any stage in life. The sooner you identify your goals and make steps to carry them out, the sooner you can achieve them.
However, it’s not uncommon to be confused about where to begin.
• Figure out what matters to you
This begins with understanding your goals. What kind of things do you aspire to do over the next few months or years? Do you want to buy a house or investment property? Do you want to buy a new car? Do you want to start a family or travel? Once you figure out what kind of things you see yourself doing, you can set both short-term and long-term goals that will bring you closer to realising those things.
When setting these goals, they need to be SMART: Specific, Measurable, Achievable, Relevant and Timely.
• Prioritise
Once you have determined your goals, you will need to prioritise them in the order of importance. This might mean paying off credit card debt before saving for a holiday overseas. Estimate how much each goal will cost and from there how long you should save for each.
• Create a realistic budget
To achieve your SMART goals, you’ll need to set a budget. You’ve probably heard it all before, but most people tend to include monthly expenses and overlook the rest. Quarterly, half-yearly or annual payments will need to also be considered.
Your budget should start with a comprehensive look at your income and determine the best way to utilise it on a monthly or weekly basis. A helpful budgeting technique to consider is the financial planning start-up, Learn Vest’s, 50/20/30 rule. This rule works on the basis that no more than 50% of your income should go to essential living expenses, no less than 20% should go to your financial priorities, and no more than 30% should go towards your lifestyle.
Another tool to utilise when budgeting is the automated deposit system offered by most online banking services. When money comes in, it might be useful to have a certain percentage be automatically deposited to a savings account specifically for the achievement of your goals.
• Check on your progress
To make sure your goals are realistic and achievable, regularly check that you’re on track. Revisit your goals every few weeks to make sure you’re on course, and not under-utilising your funds. Whenever your circumstances change, make sure you re-adjust your budget accordingly. Specifically pay attention to any changes in income or if your mortgage, utility bills or other expenses have increased or decreased. Make a yearly habit of reviewing whether you have met your previous goals.
• Consult a professional
It’s always in your best interests to speak to a professional who is experienced and skilled in helping people to reach their financial goals. Whether that be a mortgage broker, tax or legal professional or a financial adviser, seeking the advice of people in the industry who have your best interests at heart is the most beneficial thing you could do.
At Select, we offer no-obligation, quality and free home loan advice to help you reach your financial goals. Give us a call on (08) 9417 3399 to talk to us about your home loan options that suit your personal circumstances.