Make sure you don’t finish another year nowhere closer to your financial goals. In this podcast episode I take you through the steps to ensure you reach your financial goals
- Understanding your Personal Financial Goals
- Seeing through your Goal to a bigger vision
- How to create a step by step plan that’s S.M.A.R.T. and achievable.
- The Financial Habits you need to build in order to achieve your goals
- How to break down The Big Number into bit size chunks and use investment growth to achieve them quicker
- Accountability partners
- Getting organised
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Speaker 1: 00:00 Welcome to Working Women’s Wealth, where we discuss what it takes to build real wealth in a way normal humans can understand. Here’s your host Lisa Linfield.
Lisa Linfield: 00:21 Hello, everybody, and thank you for joining us today on Working Women’s Wealth. For many of us, we’ve got through January. We have either just settled all the Christmas debt or are still needing to settle the Christmas debt and somehow the New Year’s resolutions that we had in place seem very, very far away. I want to chat a little bit about setting personal financial goals. Personal financial goals like any goals are hugely important to make sure that you will reach your financial target. It has been proven and there’s research to show that people who look more than eight years in advance have way more savings towards retirement and towards their long term goals than those who are just trying to get through this year.
I know that for all of us there are so many expenses to pay for just this year. There’s school fees, the children seem to grow out of their shoes every single month. There’s so many expenses and we’re just trying to keep our head above water, but my advice to all of you is have a very clear view of what your personal financial goals are. Look forward, see what your life should be like in 10 years time. Because with that forward vision, you will never start saving right now. One of the things that I shared with you in a previous podcast was even if you’re just saving 200 rand for that goal, by the time you wake up out of the phase of so many huge expenses, you will have money that has accumulated because it’s been consistent saving each month, every month and that compound interest will make it grow and grow and grow.
That before you know it when you get back to full-time saving or heavier saving, you will have already been stepping towards that goal. The most important thing that you can do is understand what your personal financial goals are. Where do you want to be? What are you trying to achieve? Are you saving for your child’s university education? Are you saving for that once in a lifetime trip overseas? Are you saving for your retirement? What is that goal? Make sure that whatever that goal is that it’s saved as part of a greater vision. You cannot have a goal that ends mid-space. For example, I want to save for retirement. Personally, that’s a big enough motivator for me to save money today for something tomorrow.
You need to see through the goal and seeing through the goal is not saying I want to save for retirement. Because when you get there, you’re going to go “And now what?” The most important thing is that you say I want to save for retirement and in my retirement, I’m going to go and sit on the beach for a month every year. I’m going to live in a little house in the middle of nowhere or I’d like just live in the city and stay where I am now. I want to and you’ve got to clearly articulate seeing through that goal into a much bigger and more emotive and contextual long term vision. Even if that is I want to save for the children’s education. I want to save for the children’s education, so that by the time they’re needing that university education, I can be then saving for retirement.
Or I can use the fact that I’m saving for in quite a while time so that I only have to save much less now because it’s going to compound over time and I’ll have more by the time they are at university. The other thing is that your goal needs to be smart. It needs to be specific. It needs to be measurable. It needs to be actionable. It needs to be realistic and it needs to be timely. The most important thing about a smart goal is that you can take steps that you can measure towards that goal. If the goal is I want to live a great life in retirement and you’ve clearly articulated it, the first step, the first measurable step is I want to have saved enough money to pay for my medical aid, my housing costs, and my basic eating and living costs.
That’s your first goal and so it’s very specific. It’s very measurable. You can action it. It’s realistic. You’re not going to set a goal that is to save an enormous amount of money that you’ve never been able to save before. Save for that first one, make it realistic, and then set a time perspective to it. I want to be able to afford the basic medical housing and food costs within the next five years and off you set pace by pace, saving by saving to go and meet that goal. Then you say my next goal is that only do I want to be able to save for retirement to just exist and survive, I want to be able to live in retirement. Now, I’d like to be able to go to movies, to one local domestic holiday, yeah, to this, to that.
Then, you save for that goal and then you keep saving for each of those bite size chunks, but make sure they’re specific, make sure they’re actionable, make sure that you can measure them, make sure they’re realistic, and make sure that you’ve set a timeframe to them. The next thing you need to do is create the financial habits that you need in order to build that goal. If it’s saving 500 rand a month, make sure that you save 500 a month. Put in place direct debit. Make sure that you make the sacrifices such that at the end of the month, you’re not minus 500, that you come out at naught. Always remember to pay yourself first towards that goal. People call it paying your future self. That should be the first priority that you have.
The second priority that you have in terms of financial habits could be paying down your debt, never going into debt, making a financial buffer that’s big enough to handle emergencies. Whatever it is that you’re goal is, create the habits that support that goal and maybe those habits is I need to have one less cappuccino a month in order to afford the 500 rand a month towards my goal or it could be I need to do one piece of freelance work in order to make that goal and that one little piece of freelance work can be as we’ve mentioned before reviewing websites, usability testing, filling out surveys. There are many ways to generate that little bit of extra cash. Whatever it is, make it a habit.
Say, on Friday mornings, I’m going to wake up one hour earlier and do one hour of usability testing and that’ll be my new habit to create the financial freedom I need. The next step is that not only must you understand how you need to make your big financial goal, break it down into bite size chunks, you also need to understand what growth you need in order that it grows over time. Make sure that you understand what the growth rate is that is needed to grow that money over time and then check it. Make sure that you checking it. Make sure that you’re keeping it measurable and you’re sticking to it. If the shares you’ve invested in or the funds or even the savings account is not generating the return you need, then reconsider what you’re invested in.
As always, my view in life is you need an accountability partner. I don’t believe any of us change our habits long term without accountability partners. There are a few amazing people, but usually they have exceptional motivation because they’ve had a bad experience or something. Make sure that you get an accountability partner that can say to you “Hey. We agreed that you were going to do this. Have you done it?” In my wealth management business, it’s one of the key things that I ask every single financial review. I say to my clients “We’d agreed that you would save half your bonus. I haven’t received half your bonus. I’m holding you accountable to that agreement.” Usually, there’s a good reason I haven’t received half the bonus, but just by me reminding them that they’re accountable for that it helps to keep them on track.
As a financial advisor, my job is not to be your nanny. My job is to support you to achieve your goals. At the end of the day, it’s your goals and your saving, not my goals and my saving. That’s the thing of an accountability partner. I’ve spoken about Kyle, my personal trainer, and he is hugely excited when I reach my fitness goals or my health goals or any of that kind of stuff because he’s supportive and invested in my future. But, it doesn’t mean that when I don’t reach it, he shouts at me. It’s not his job. It’s not his issue. But, an accountability partner just by having that relationship or conversation means that you’re able to then come back to those goals and do that stuff that you need to do and they help you stay on track.
Lastly and one of the most important things in financial goals is to make sure that you have really articulated your goals well enough that you can get organized. Remember that if you go and buy a whole bunch of birthday presents long in advance at the wholesale shop, you’re going to spend a lot less money than if just before the party you’re daughter says to you “Mom, have we got a present for Mary?” You look then you go “Oh no” and you scream off to a shop on the way to Mary’s party. You’re bound to buy a more expensive present. Make sure you get organized. Christmas comes at the same time every year. Start earlier. Start in October and buy well thought out presents that don’t cost you as much and you’re not inclined to go over budget.
I can spend almost double if not triple on a birthday present if I’m in a rush because I don’t want to face the embarrassment of arriving at a party without a present and so the first present that crosses my path no matter what it costs, obviously to a limited degree, gets bought. Literally last week, I went and brought a stack of presents so that we’re organized and ready. Get organized with your finances. Make sure those direct debits are up to date. Make sure that you’re not missing payments so that you’re getting blacklisted. Make sure your finances are in order. People who are organized about their finances are the people who are most likely to succeed in reaching their financial goals because they don’t wake up a year later and go “Yeah. I forgot to save my bonus and I’ve spent it all already.”
Make sure you’re organized for every step of the financial way. As we coming to set financial goals, I wanted to let you know that we have a course in Johannesburg for the listeners that are based in Johannesburg on the 10th of March, which will deal with financial goals and making sure that you have a tangible plan to reach that goal. If you’d like to sign up, go to workingwomenswealth.com. I’m Lisa Linfield and this is Working Women’s Wealth. I hope that this year you too will reach your financial goals.