Setting financial goals

Saving can be hard. One thing that is proven to make it easier is if you allocate your savings to specific financial goals that you set yourself. Here we can over what your financial goals might look like and what you can do to reach your targets in 2022 and beyond.

What is a financial goal?

A financial goal is simply a plan you make for your money. Each day, week, or month, you allocate money towards achieving your goal. You goal might include saving for some of the following reasons: 

• Saving for an item you want to buy – perhaps a bike, laptop or even a car 
• Paying for your wedding 
• A deposit for a house or flat 
• Starting a family 
• Your kid’s uni fund 
• To get out of debt 
• For a holiday 
• To pay off your mortgage early 
• For retirement 

Why set a financial goals?

Having a financial goal is making a little promise to yourself. If you have a set goal in mind it can change your spending behaviour. Let’s say for example you want to save the deposit to buy your first home. If you don’t have it set as a financial goal, what difference does it make if you buy takeaway coffee every morning? However, if it is a financial goal, and you start to make steps towards it, you start to question these decisions such as takeaway coffee in the morning, and ultimately move quicker towards your goals.

What else could you be doing with your money?

If we continue with the coffee analogy, if you were to give up those coffees in the morning, maybe a takeaway at the weekend, would it be possible to save yourself an extra £25 per week? Don’t worry if you can’t manage this amount, but if you can, let’s take a look at what you could do with that money.

Over 5 years – you’d save £6,500

Over 15 years – you’d save £19,500

Over 30 years – you’d save £39,000

However, these figures don’t take into consideration interest you’ll earn on your savings – OK we admit with savings rate so low, it won’t be much – but every little helps. The point here is, is it worth having tens of thousands of pounds in savings just by giving up takeaway food and drinks?

How to set financial goals

Write them down – by writing you goals down it brings them to life. Pin them on your drawing board, write them in your diary, and regularly remind yourself of your goals. It will help you to keep on making sound financial decisions throughout the weeks and months. 

Make them realistic – there’s no point in making goals you can’t reach. All that will happen is when you miss your target you’ll become disheartened and stop working towards your goals. Before you make any plans, have a look at your income and expenditure and decide upon a realistic target. 

Break them down – if you’re making long term goals such as a retirement plan, break down your goals. If you have a specific amount you want to save over 15 years, break it down into a monthly amount. It will keep you motivated and make it easier to keep a track of your progress. 

Create savings accounts – one essential step to hitting your financial goals is to open savings accounts and name them for each of your goals.  When you have a bit of spare cash, transfer the money into one of your savings accounts. If your goal is paying off debts, then transfer money to whoever you owe when you have a little spare cash.