First published in the Business Insider Australia on 16th January 2019
A new calendar year is always full of hope and promise – a chance to start fresh, which is why many take the chance to set resolutions. Whether it be to get in shape, get a new hobby or read more, a lot of us set out with the best of intentions, but never quite make it to the finish line. It’s estimated that 80% of resolutions fail by the second week of February.
So why is it that people fail? They don’t have a plan. Taking control of one’s finances is one of the most popular, and arguably, most important resolutions you could make for 2019, and yet, according to research conducted for the Australian Securities and Investments Commission (ASIC), about 45% of Australians say they have a short-term financial plan in place, while less than a quarter say they have a long-term plan. So how do you go about setting financial goals that you’ll actually stick to?
Think about your goals
Start by sketching out what you want to achieve in the short, medium and long term. These could range from taking control of your debt, to saving for a holiday, to purchasing a new house. In the beginning, it might look like a mind map on a piece of paper, but this will be a good starting point.
Review your finances
In order to create a plan, you will need to take a look at your financial position using a whole of wealth approach – taking into account all your assets and liabilities. Look at everything from your credit history, to money in the bank, to investments, to loans or debt and figure out your financial position. There is some great tech out there to help you keep track of all your financial data in one place, so you can know your true financial position in real-time.
Once you have the goals nailed down, it’s time to prioritise. Start with the three basic measures of financial health: your retirement fund, emergency fund and debt repayment. You want to approach your more urgent liabilities first such as high-interest debt repayments and then progress from there to goals like saving for a holiday or purchasing a new car. Set a timeline for the goals based on their urgency – breaking them into tangible short-, intermediate- and long-term financial goals.
Create a budget
There are some great resources online to help you create a budget, including ASIC’s MoneySmart budget planner, which you can keep updated. Or, tech can help you budget on the go. With live feeds from your financial institution, expenses filter in and are automatically categorised so you don’t have to spend time fiddling around with spreadsheets.
Stay on track
If you’ve made it this far, the work isn’t over yet. Sticking to your goals is almost as hard as setting them. Keep yourself accountable by checking in on how you’re tracking regularly. You might set yourself a recurring calendar reminder to do so, along with training yourself to readjust your goals and timelines when something comes up like an unexpected bill.
It may be daunting, but the good news is you don’t have to go it alone. All of the greats had a coach or a mentor – someone in their corner to guide them along the way and help them achieve their goals. Where would Muhammad Ali be without Angelo Dundee? Or Serena Williams without her dad? Or Rocky without Mighty Mick? Well that one was fictional, but you get the idea. Consider enlisting the help of a financial adviser to help you set realistic goals, keep you on track and help with any adjustments that need to be made along the way.
It won’t be easy, but by prioritising and breaking down your goals into short, medium and long term categories, budgeting, leveraging tech and seeking guidance, this time next year you can look back proudly on how far your financial life has come.
By myprosperity CEO, Stephen Jackel