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:
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.
14 January 2020