Set your Goals for 2020

Now is a good time to review your goals and financial plans to ensure you make the most of the next 12 months.

When setting goals, ensure they are SMART goals i.e. Specific, Measurable, Achievable, Realistic, and with a Time-line. Some example goals to get you thinking:

  • Grow my super to $1,000,000 by age 60.
  • Ensure my family is financially secure should something happen to me by 01 February 2020.
  • Save a deposit for my first home, target $100,000 by 30 December 2022.
  • Save & invest 10% of my salary starting 01 March 2020.
  • Establish an investment portfolio that will generate a passive income of $30,000 per annum by 30 December 2035.
  • Pay off my mortgage by 30 December 2030.

Each of the above long-term goals can then be broken down into smaller, bite size, goals that are less daunting but necessary to achieve the larger goal. Ask yourself: What do I need to do each week or each month to achieve my goal by the due date?

Take the goal to grow your super to $1M by age 60 and assuming you are currently age 30. You have thirty years to achieve the $1M goal. So that means you will need to make a minimum of $860 per month super contributions for the next 30 years plus an investment return of 7% pa (nett of fees & taxes) with all earnings reinvested. Assuming your employer pays $550 per month super guarantee contributions, then the difference you need to save or salary sacrifice is $310 per month, every month for the next 30 years.

When you break it down, the goal now looks more achievable and you can work your budget/spending plan around your goal. Ensure you budget in some “fun” money so that you don’t feel deprived and some “emergency” funds so you’re not tempted to dip into your savings for unexpected bills. Although your total contribution adds up to just $309,000 over 30 years (including the employer contributions), the rest is investment returns and compounding returns.

If you can save more, then increase your goal or set another goal so that you don’t waste your hard earned money on “things” you don’t really need!

If you can’t save the amount you need to, then revisit your budget/spending plan to look for savings and reduce expenditure on those things you don’t really need. Alternatively, look for ways to earn more (sell those things you don’t need on ebay), get a second job, extend the time-line, or reduce your goal as a last resort. The main point is to get started, otherwise your goal will never be achieved. And the earlier you start, the less you need to save due to the effects of compounding interest. More on this next month.

I hope this helps you to make the first step towards setting and achieving your goals in 2020.

Audere est Facere!

Sofie Korac
14 January 2020

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Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

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