“I've recently received a promotion at work, and I'm keen to use the extra income wisely. How can I set realistic financial goals that align with my long-term aspirations, and what tools or methods can I use to track my progress effectively?"
-Question from Emma in Ballarat, Victoria
Top answer provided by:
Mark Candy
Hi Emma and thanks for your question.
Firstly, let me say congratulations on your recent work promotion, and kudos to wanting to utilise this extra income, wisely.
As you have already touched on, setting realistic financial goals that align with your long-term aspirations is a key step towards creating financial success.
Here are some steps and tools that I would suggest, to assist you with this:
Setting Realistic Financial Goals and using the SMART principle (Specific, Measurable, Achievable, Relevant and Time bounded):
1. Define Your Long-Term Aspirations:
-Identify your dreams like traveling, buying a house, or retiring early.
-Visualise where you want to be financially in say 5, 10, or 20 years.
2. Break Down Goals into Smaller Steps:
-Divide your long-term goals into smaller, achievable milestones.
-For example, if your goal is to buy a house, break it down into steps like saving for a deposit or establishing a credit rating with a lender, etc.
3. Make Your Goals Specific:
-Instead of "save money," specify an amount and a timeframe. For example, "Save $10,000 for an emergency fund in 12 months."
4. Ensure Goals Are Measurable:
-You should be able to track your progress quantitatively. Use numbers and dates to define your goals.
-For instance, "Invest $250 per month in an investment account" is measurable.
5. Time-Bound Goals:
-Set deadlines for your goals. This helps create a sense of urgency/focus and keeps you motivated.
-"Pay off $5,000 in credit card debt within 18 months."
6. Align with Your Income and Expenses:
-Ensure your goals are achievable with your current income and expenses.
-Adjust your spending to make room for savings towards your goals.
7. Review and Adjust Regularly:
-Life circumstances change, so regularly review and adjust your goals as needed.
-Celebrate milestones and progress along the way.
Tools and Methods for Tracking Progress:
1. Budgeting Apps (Download for free via Apple App Store or Google Play):
-Frollo: Helps with budgeting, savings goals and automatic bill tracking.
-Up: Pay day automatically splits your salary into bills, savings and spending.
-Beem: Split bills and send instant payments, track shared expenses, shopping rewards.
2. Goal-Tracking Apps:
-Trello: A task management and team collaboration app that can also be used as a goal progress tracker. It comes with an intuitive user interface. Offers a free plan.
-GoalsOnTrack: A goal-setting app that lets you break down goals into smaller steps and track progress.
3. Spreadsheet Templates:
-Create a simple Excel or Google Sheets document to track your income, expenses, and progress towards your goals. Customise it to include categories like savings, debts, investments, and monthly progress.
-Or you can use the Moneysmart Budget Tool.
4. Automatic Transfers:
-Set up automatic transfers from your bank account to your savings or investment accounts, to ensure you're consistently saving towards your goals.
5. Visual Aids:
-Use a visual progress tracker.
-Seeing your progress visually can be motivating.
6. Regular Check-Ins:
-Schedule regular reviews of your finances, perhaps monthly or quarterly.
-Analyse where you stand compared to your goals and adjust your plan if needed.
7. Seek Professional Advice:
-Consider talking with a financial adviser.
-They can help you set realistic goals based on your income, expenses, and long-term plans.
-An adviser can also provide insights on investment strategies aligned with your goals.
Some final tips for consideration Emma.
Remember to be disciplined but flexible. Life will undoubtedly throw you curveballs, so adjust your plan when necessary.
Stay motivated by visualising the benefits of achieving your goals.
Don't compare your progress to others. Your financial journey is unique to you.
By setting realistic goals, using effective tracking methods and / or by talking with a financial adviser, you'll be on your way to achieving your long-term financial aspirations.
I wish you all the very best with your journey!
Mark
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