Tuesday, 10 December 2013

Start thinking about your 2014 Financial Goals

With only 3 weeks to go until the end of the year it is once again time to start thinking about your goals for the next financial year.  Although this is a finance blog and I will be putting up my financial goals, it is a great time of the year to be thinking about all of your life goals for the year.

Last year, around this time, I put up a post on how to set goals for the upcoming year and this post is going to be much of the same.  However, this year I will focus much more on what you should be thinking about when it comes to your financial goals.

It is very hard to separate your financial goals from your life goals

Trying to set financial goals without thinking about what you want for the rest of your life is pretty pointless.  Not only are you unlikely to set good goals, if your life goals involve some pretty big expenditures, your financial goals should reflect this and should aid in the achievement of this goals.

In fact, I think the first thing you need to do is to sort out exactly what life goals you want to achieve in the coming year and then set your financial goals after this.  For example

  • If you want to get engaged this year (as many of my peer group do), you will need to buy a ring.  This should then feed into your financial goals.  For example - I want to get engaged in June, and I want to pay for the ring in cash so that my savings are not affected so I will need to save $5,000 / 6 = $833 per month
  • If you want to go on an expensive holiday you will need to pay for this - do the same as the ring example above - set a time frame and savings objective and this will lead to a financial goal for the year
  • If you want to buy a house in two years time then perhaps you should start saving for a deposit now and your financial goals should revolve around this
It really depends on what you want to do with your life.  Also, you don't just need one big goal like I have stated above.  I have started to think about what I want for 2014 and it looks like it is going to be a big 'life' year for me, so perhaps my goal will be to keep my savings flat for the year and fund the large expenses with cash...I'm not sure yet.

Track your performance

The best way to keep on top of your goals for the year is to track your performance against whatever metrics you set.  I do this via my expenditure tracker.  For the last 2 years I have done this for 3 categories - share investments, offset account and personal expenditure.  I am thinking about putting much more detail into this so I can see how I am tracking against specific goals.

It doesn't really matter how you do it.  You can do it in a book using pen and paper or you can have a really complicated excel spreadsheet set up and enter your performance step by step - as long as you are constantly keeping track of your goals.

Your goals should be flexible

Life never goes according to plan.  I could never have guessed how different my life would be now compared to when I was last thinking about setting these goals - and if you think back a year the chances are that you have had a similar experience.

Be prepared to change your goals as the old ones become obsolete or as you find you are over or under - achieving what you hoped to get to.  You can't view these goals as a success or failure type measure because life is fluid.  Work out what part of your goal is your real objective and stick to that part. 

Write down your goals

Make sure you have your goals written down somewhere so you can refer back to them.  Sometimes I would forget my goals and then go to my blog post at the start of the year where I wrote them down to check how I was going against them.

Writing goals down makes them real and makes sure you don't forget them.  I will write up my 2014 goals in the new year when I have worked out what they are.

Have you started setting your goals for 2014?  Are you stretching yourself?  How achievable are they?

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