Your guide to setting (and achieving) personal financial goals.
Financial goal setting is one of those “adult” things that we all know we should be doing, but how many of us actually have an actionable money plan in place? Yeah, that’s what we thought. Not to worry, we guarantee you’re not alone on this. That’s why we’ve enlisted our resident financial expert to share her step-by-step guide on how to get started. From setting yourself simple and achievable financial goals, to ensuring you’re well equipped to hit them, here’s everything you need to know.
1. Set Your Financial Goals
First of all, write down what matters to you. This could be anything from paying off credit cards, taking a gap year, retiring in the South of France, or moving to work for an NGO later in your career. Write down all your goals, from the practical to the whimsical and distant. Once they are written down, you can inspect and weigh their importance.
Next, work out what is in reach, what will take time and what is part of a much longer-term strategy. I find that separating them into three headings really helps: goals for the next one to two years, the next five to ten years, and for the distant future.
Sassy Tip: Apply a SMART- goal strategy. That is, make certain your ambitions are Specific, Measurable, Achievable, Relevant and Timely.
Examples Of Financial Goals And What To Consider
Make A Budget (And Live By It)
Most experts agree that budgets are useful, if only to clearly define the amount of income and fixed expenses in your household. It is also a reality check. In my case, looking at my budget revealed that the small things I buy online really add up.
Pay Off Credit Card Debt
This should be the first priority for anyone serious about their finances. In Hong Kong, we are rewarded by every credit card transaction, be it in the form of discounts, points or air miles. Most credit card companies also put up the limit on your cards quite frequently, giving you a false sense of an emergency back up if you need it.
When we use cards for most things, it’s easy to lose track of what you are spending. The credit card system enables people to make poor decisions. Only paying the minimum amount each month means the credit card company charges a huge amount of interest (up to 50% p.a.) on your purchases. If you struggle to keep on top of your cards, reducing the limit can be very helpful in the short term as it prevents you from overspending. Some credit card companies will also allow you to set up alerts that warn you how much you can spend per week.
Save For An Emergency Fund
Three months of your expenses is a minimum standard. Six months (or more) is better. Where there’s a fragile job market, emergency funds are essential. In Hong Kong especially, we spend far more of our salary on rent than most places, so it’s vital to make sure that if you were to lose your job or need to take time off for sickness, you would be able to maintain your home.
Save For Retirement
Delayed gratification remains an elusive concept for some people. However, as we are now living longer, saving will ultimately enable us to have a better life in our future.
2. Create A Realistic Budget
Now you have your goals sorted, it’s time to create a realistic budget. To do this, you first need to know what you have coming in and going out each month. Just writing it down in a simple list can be effective, but this can also be as thorough and spreadsheet-focused as you are comfortable with. It’s a good idea to look at your outgoings for the previous three months to get a good idea of what you are spending regularly and what is a one off. I print out my credit card and bank statements quarterly to make sure I am on track.
3. Save, Save, Save
With any luck, your tough, realistic, water-tight budget will show at least a handful of leftover dollars. Whatever that amount is, have it automatically directed into a separate account designed to address the first couple of things on your list of priorities.
4. Be Flexible
Monitor your progress and be realistic. If you continually dip into the savings account to make sure you cover your expenses, then you need to look again at what you are spending.
5. Have Fun
Remember, setting goals shouldn’t feel like a never-ending chore. Hong Kong is like Disneyland for adults: there are so many opportunities to have fun, be it a brunch, junk or a weekend away. It would be a false economy to spend nothing now and save everything for the future. It’s important to reward yourself when you have made progress.
Once you’ve tackled the high priority goals like paying off credit cards and loans, or making sure you have a robust emergency fund, it is vital to treat yourself. This doesn’t have to be a big expensive gift; it could be as simple as a family day out, a special dinner or a relaxing massage. You have worked hard for your money and you should enjoy the fruits of your labour, both now and in the future.