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Financial Goal Setting

Part Three

This is the third post in my series about creating a five year spending plan. You can go back and start at the beginning by reading this post which gives you an introduction and then step one, about ‘How to Take a Financial Snapshot‘. You’ll need to have completed the task in the second post to move on to this next part which is all about financial goal setting.

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The starting point is your financial snapshot that you worked out last time
Set a goal

So next what I want you to do is to look at that ‘financial snapshot’ number and think about what you want it to be in five years. Ideally, we’d all like to be millionaires and not have to worry about money again, but try to have a realistic perspective. Here are some questions to think about.

What debts do you want to reduce? Do you owe a lot on credit cards or have a student loan debt you want to get rid of? If you have several debts you need to decide which is your priority as you might not be able to pay them all off within the next five years. There are two ways of doing this. First there is to choose the one with the highest interest rate as this is costing you a lot of money. Alternatively you could pay off the smallest one first. This can give you that sense of achievement rather than slowly chipping away at a large debt. You can find more information about these ways to address debt, called the snowball and avalanche methods on Dave Ramsey’s website.

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Your home is one of the main areas where your finances will be focused
Spending on a home

If you’re a home owner do you want to overpay your mortgage. There are two schools of thought on this and I used to be in the overpay as much as possible and now I’ve changed to the just let it run and invest as much as you can. Overpaying may not be realistic at this time anyway and paying off your credit cards might be your top priority. Just take a look at your figures and imagine the ones you’d like to see in five years’ time. Do that for both your debts and your savings.

If you’re renting would you like to own a home in the future. How much would you want to pay for a home? Once you’ve decided that you’ll be able to work out how much you need to save for a deposit. There will also be other expenses associated with purchasing a house and being a home owner. You’ll need to do some research to get an idea of how much you will have to put aside.

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Your future self might be a parent and so you’ll need to plan how that’s going to work financially
Life goals

Perhaps you might have other life changes in mind such as going to college, having a family or moving abroad. This really is the chance to think about your ideal life in five years’ time. If you’re struggling to think of the different areas that you might want to change and need some ideas my eBook ‘How to Create Your Future Self’ is there to help. It’s completely free. All you need to do is subscribe to this blog and you’ll receive a copy straight to your inbox. There are 13 chapters covering topics from health and your environment to fun and personal contribution. It gives you information, worksheets and links to further reading. So if you haven’t got your copy yet why not fill in the form at the end of this post and get your eBook today.

Next time

So that’s is for this week. So far you should have an idea of how much you owe, how much you’ve got saved and where you’d like to be financially in five years’ time. Next week we’ll start creating your financial plan for how you’re going to get from where you are now to where you want to be in the future.

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Author

samssimplelife@outlook.com

Comments

November 21, 2021 at 11:10 pm

Thanks Sam

I think having a plan is so important.
So many of us think that if we just keep what we have been doing for years we will get ‘somewhere’.

The fact is, so few people are brave or wise enough to plan for their future and so they do indeed end up landing ‘somewhere’.
Somewhere is not always ideal, or as good as that awesome life you might dream of and work hard to achieve.

Having said that, I often think about my time in Highschool, trying to workout what I wanted to do after school, which in my mind was always going to be university. The thing is, I couldn’t choose between two completely different degrees. Not only that, my parents had their hearts set on me choosing a third, entirely different degree.

On top of that I had to choose my six subjects to study for my leaving exams, and the degrees I wanted to study had various high school courses as prerequisites for entry. Luckily, i was able to choose 6 high school courses that not only set me up for the 3 degrees i had on my short list, it gave me a chance to see if I liked some of things i would potentially continue to study at Uni.

In the end, I chose my degree on the friday before the Monday when Semester 1 began…..

(Im looking forward to the next post in the series)

Shaun



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Build Your Spending Plan

November 20, 2021

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