As we enter the new year, we’re presented with the perfect opportunity to reassess our goals, and what we would like to achieve in the coming year.
You may have made a new year’s resolution to get healthy or start a new hobby, but have you considered setting yourself objectives when it comes to your finances?
Whatever time of the year, setting goals is vital if you’re creating a financial plan — a part of the process which is often forgotten. When you seek professional financial planning advice, you’ll be provided with a bespoke and detailed financial plan, that not only meets your individual needs, but also helps to achieve your future goals.
In this article, we’ll explore how you can go about setting your self financial goals, and some of the objectives you should consider for 2022.
Steps to take to set financial goals
Before you think about which goals to set yourself for the year ahead, you need to know the best approach and how to set these goals. Some of the steps you could take include:
Evaluating your current situation
The first step is to look out your present finances. This means calculating, and understanding, the total value of your assets and income, as well as the tax liabilities and expenses you’re already paying. You can then compare this to what you would like for your financial future.
Goals should be SMART
You may have heard of this acronym in your workplace, but the same principle applies to financial goals. SMART stands for:
Creating goals which are too vague or impractical can increase the chance of failure. A SMART goal is likely to be more sustainable and achievable. Consulting with a financial adviser can help to review your financial situation in depth, as well as set SMART objectives.
Continually review your goals
Much can be thrown at us during our lifetime, and often we have to deal with unexpected events. The recent pandemic is a clear example of this — disrupting our work lives, social interactions, finances, and the economy of the entire country. Therefore, as our life changes, it’s likely our financial situation and aspirations will change to.
Your financial plan shouldn’t be set in stone, and so the goals you have previously set should be reviewed. Experts recommend this should be done at least annually, and through continuous evaluation, you can adjust your objectives accordingly.
Financial goals you can set this year
Now you know how to set your financial goals is the most effective way, let’s take a look at some of the objectives you can consider as part of your financial plan:
Pay off debt
The most common debt we accumulate is through credit cards. These often have costly interest rates, which can make achieving other financial goals more difficult. Of course, this depends on your personal circumstances.
One strategy to adopt, is listing all of your debts, making it clearer and easier to create a plan to manage this debt. You can either sort the list from the highest interest rate to the lowest, or in order from the smallest to the largest amount.
Grow your retirement fund
A long-term plan, contributing to a pension is a popular goal to achieve. It’s never to early to start thinking of your retirement, the lifestyle you wish to lead, and most importantly your income for the future.
Part of this plan will include estimating your needs, likely income and expenses during retirement. This can help to conclude the size of the pension pot you require. Making the most of your pension can also help towards tax-efficiency in your financial plan.
Build your savings
This could be achieving a target of a certain amount to pay towards something particular, or to create an emergency fund for when the unexpected happens. Whatever you’re savings a for, the first tip is to break down the main objective into smaller goals. This could mean changing your prospective from how much you need to save within a year, to the amount you need to save each month.
You should also use any extra income to your advantage, and put it towards your savings as soon as possible. If you receive a bonus or a tax refund, for example, placing this extra cash into your savings account straight away will not only grow your fund, but also remove the temptation to spend it.
Whatever goals you want to achieve in 2022, speaking to a financial adviser is worth considering as part of your plan for the year. They can help to fully assess your situation, put the best strategies in place which are unique to you, and help you on your journey to achieve your goals.