If 2020 and the coronavirus pandemic has taught us anything, it’s to prepare for everything. Whether you have so far weathered the financial storm, and even managed to save a few pounds, or you’ve been left battered and bruised by it, the start of a new year is a good time to focus on your finances. A financial goal can be anything from getting on the property ladder, to retiring early, or to being debt free.
If you’re thinking of sorting out your financial goals this year, remember to go at your own pace. See it as a marathon, not a race and remember that great goals can take time to accomplish. With that in mind, here are a few short- and long-term goals that could be just within your reach.
Create Multiple Income Streams
Even if you love your job, creating multiple income streams is a form of income insurance. For that reason alone, it needs to be on your list of good financial goals.
But here are even more reasons:
- One of those income streams could be the part-time cash flow that enables you to semi-retire at an early age
- If you want to start your own business – but don’t want to quit your job – starting a side business could be the way to do it
- The extra cash flow from any additional income stream could be used to help fund your retirement savings
- It could also be used to help you pay off your debts
- Several income streams could provide you with an income portfolio, that means that you’re not dependent on a single source of income – ever!
Start Saving 10% of Your Income
You’ll learn that the biggest secret to prosperity is saving 10% of your income first, before doing anything else. To clarify, we’re talking about 10% of your take-home pay, not your gross pay.
The most common money mistake people make is that they make their expenses their top priority which rarely leaves any money to save. When we form this habit, our expenses tend to grow to meet our income.
We evaluate what we can “afford” based on 0% savings. Instead, we need to train ourselves to save 10% first and then cover our bills with what’s left over. Ask yourself, “What can I afford with 90% of my income?”
Regardless of how much money you make, set a goal to start saving 10% of your income from every check you receive.
One good way to do this is to set up an auto-deposit with your employer. Many companies can split your paycheck into multiple accounts, so be sure to ask if they can place 10% of your check into a savings account for you
If you’re still in the early years of your career, now may be a good time to start making your money work for you by investing. Investing is a great way to save up money while also accruing wealth over time, allowing you to reach financial goals like retirement. While investing may seem like a difficult task, the good news is that it’s easier than ever to get started.
Before you start, formulate a plan for how much you will invest, decide on your short and long-term goals, understand your risk tolerance, and most importantly, decide where you’re going to invest your money.
American consumerism has created a more-is-more culture. Need proof? Next time you’re driving, take a look around (safely) and note how many pickup trucks are on the road with you. What percentage of those drivers do you think actually need a pickup truck? How many of them, for example, are contractors? The same applies to houses. How much of your house are you actually using? How much of the unused space is crammed with stuff you haven’t touched in years? Principally, financial freedom begins with embracing less, the essentials. That doesn’t mean you need to live like a monk. After all, 2020 was one of the most challenging years in recent memory for physicians. You deserve some creature comforts. But, to quote a line from Fight Club, it becomes a problem when “the things you own end up owning you.”
Set a Goal…
Having financial goals in mind is great, but they can only be achieved if you have a way to implement them. For example, if you’re looking to save money you need to know what the target amount should be, how much you can save toward that goal each month, where the money will come from, how you can save so you don’t spend it, how you might be able to invest the money you save and grow it, etc. Having a plan that addresses all these moving parts is an important step to ensuring you have a quality, financial goal and you can realize it. It’s also a great way to help you stick to the program. Start by:
- Deciding what action steps are needed to reach your goal
- Creating a schedule for your action steps
- Following through on each scheduled action step
Reallocate Your Spending as You Reach Financial Goals
Maybe you look at your savings strategy and decide you need to pay off credit card debt before you start saving for a new car. Or you might choose to make smaller contributions to your retirement fund while saving up for a home down payment. Either way, over time you should see yourself reaching short-term goals, which means you’ll have extra money to put toward other areas of need.
As you reach these milestones, re-examine your spending and decide how to best recalibrate your goals. Maybe new short-term goals are ready and waiting to be added to the mix. Or maybe you have an opportunity to devote more of your money and energy to pursuing long-term financial goals that are years in the making.
Whatever you decide, make sure your goal-setting remains focused on the cornerstones of excellent financial health: paying down debt, increasing savings, strengthening your credit score, and protecting you against unexpected expenses.
Goal-setting may be challenging for people who have struggled to stick to budgets and savings plans in the past, but this process can also be exciting. If you’re able to create a plan and see it through, you’ll be able to improve your financial wellness and dream of new goals that once seemed far away.