“Money plan” is a buzz phrase made up by the financial industry, though they LOVE to use it. A basic money plan is whatever you are doing to ensure that your money is working for you.
Throughout your lifetime, you will always be saving up for something… whether it’s a bag, car or a house, these wants and needs all start as a goal.
By making a plan and setting goals is the most crucial step to achieving improved financial health. “If you fail to plan, you plan to fail” isn’t a saying for nothing.
Everyone! Be SMART!
To give yourself the best chance of sticking to your financial goals, they must be S.M.A.R.T – specific, measurable, achievable, realistic, and time-bound. Once you have your SMART goal in mind, you can create a plan for how you’ll achieve it.
For example, if you want to pay off your $5000 credit card debt by the end of the year, work out how much you can allocate to your goal each day/week or month. By breaking your goals into smaller, more manageable pieces, you will find the difficulty factor you have given to them decreases rapidly!
Specific: I will pay off my credit card balance of $5000 before the end of 2021
Measurable: The current balance is $5000; I will make monthly payments of $420 until paid off.
Achievable: I have 12 months of 2021 to pay the total, I know that I make X amount per week, and I can use any extra from my tax return in July to cover any extra interest or make another payment.
Realistic: I’d love to pay it all off tomorrow, but that isn’t realistic. Based on my budget and discussions with my local financial adviser, I can pay $550 per month but have left a buffer for extra savings or unexpected expenses.
Time-bound: I will have it paid off by December 31 of this year.
Achieving Your Goals
Setting tangible and realistic goals and following them up, and tracking your progress are fundamental practices to achieving desired success in anything.
Financial goals can be broken into short-term, mid-term, and long-term sub-categories. Figuring out which sub-category your financial goal falls under is the first step to setting up your goal. The next step is to determine how much money you need for it. Then, create a budget to regulate a percentage of your income to go towards a saving account for the financial goal. Now, you might have more than one goal, so you must prioritise each of your financial goals.
It is easy to enjoy spending money… it is used as a luxury and obscures any future foresight. This is why financial goals are so important. Setting financial goals will help you figure out what you are trying to achieve. You will better be able to define your success!
Celebrate the wins!
Achieve a goal? Excellent! The money plan worked now. It’s about enjoying the fruits of your labour! The celebration can be making the purchase that you were saving for, enjoying closing that loan or debt off, or simply having a celebratory meal out with friends and family. Just make sure to celebrate those wins.
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