It’s only November, but I always start reflecting around this time of year and I bet many other people do too. We start to think about what we’ve achieved in the past ten months and what we can squeeze in to the last two months.
All tradies know that customers always seem to want their projects finished before Christmas. How about learning how to finance those projects and other goals before Christmas as well?
Along with career, love, family and recreational goals, you should always be thinking about financial goals. If you don’t love managing your money it can be hard to think about your money future, however the best way to achieve any financial goal is to have something tangible to hold onto while you work at it.
This blog post is full of ten ideas for goals you could work on. I cater for all financial stages of life – aside from those super billionaires, but I bet you have your own ideas at this stage 😉
1. Find a Stable Job
This might seem like a strange goal to have on this list. Shouldn’t I be talking about what to do with your money, not how to receive it?
However I’ve placed this at the top because stable income SHOULD be the first financial goal. Achieving financial freedom is nearly impossible if you don’t know where you next pay check is coming from.
Stable income looks different for different people. It doesn’t always mean you must be a permanent employee at a company – even those jobs can become redundant. You could be a freelancer with a solid business and a network to find jobs from. Or an investor with a broad portfolio.
Prioritise finding a job you feel secure in. No occupation is 100% water tight, but there is a difference between a permanent full time role and receiving a handful of shifts at a quiet business.
2. Establish and Use a Budget
Are you struggling to know where all your money is going? Do you still panic about paying the bills even though you earn six figures? Sounds like you need to budget!
I promise it’s not as hard as it sounds, and it’s really satisfying to know where your money is going and that you can survive. It will also make saving for holidays and major purchases a breeze. It’s really exciting to watch your money grow and is integral for your financial success.
Don’t hide from your money. Learn how to live stress free even if you don’t earn lots of money. Check out my blog post on how to create your own budget. You will always have money for bills after reading and heeding the words in that blog post.
3. Save an Emergency Fund
Also referred to as a rainy day fund, an emergency fund is an integral part of your budget, but even if you are too scared to start budgeting please start saving an emergency fund.
The basic goal for a single person is to aim for $1000
To be honest, my partner and I haven’t achieved $2000 between the two of us yet for two reasons:
- We don’t save a big chunk into it each pay
- Even when we do get close to that figure we have to dip into it for some reason. Broken car, broken dishwasher – being an adult is fun!
However once we reach the $2000 each we will be ploughing on to try and save 3 months worth of income. And then 6 months. And after that, who knows?
Don’t put a limit on your emergency fund because I guarantee it will save your arse one day. Don’t spend it on clothes or games or alcohol or books. Keep it safe for essential living expenses. It should only be used for things that are essential for making money or essential for living like hygiene and eating.
Also, do as I say, not as I do. Even though we DO have an emergency fund, put more towards it than I do. As I said above, we haven’t reached our emergency fund goals because they’re not a priority. BUT I have other squirrel holes we could take money from if we really needed to. I squirrel money away for a ton of different categories like health, renovations, car expenses (that aren’t related to registration) etc.
It is easier for the average budget-scared person to have one emergency fund and to plough a ton of money into it. Make it a game of reaching that $1000 as soon as you can and then reduce your saving to concentrate on fun things like holidays. But always trickle a little in your emergency fund and remember to top up when used!
4. Pay off Bad Debts and Improve Credit Score
I’m trying to do these in a logical order. Hopefully as part of your budget, you have included all of your debts: credit cards, car loan, Afterpay etc. However, if not (or if you don’t have a budget) then please prioritise paying off bad debt first!
It’s important to build an emergency fund while paying off debt because it will stop you from having to reach for credit cards or personal loans in the future. You should give yourself a spending section in your budget as life is supposed to be fun, but a large portion should go to getting out of and staying out of debt.
Once you’re out of bad debt (you may still have a mortgage which is a “good” debt because it’ll give you something in the long run) you should look at improving your credit score.
This involves taking on more bad debt, but instead of getting into a dire situation, you should pay the debt off immediately.
Use your credit card at the grocery store or the petrol station, and then pay it off as SOON as you get home with the money you already put aside for those essential purchases.
In Australia we don’t talk about credit scores as much as in America, but banks still do look at them. My partner and I were lucky being two single people with full time jobs, no dependants and no bad debts against our name. However our mortgage broker still suggested we apply for a credit card. We could choose not to use it, but we use it and then pay it back straight away to have a good credit score.
Not sure what your score looks like? Google “free credit score checker” and make sure to pick a website that doesn’t affect your score when you check it. Sounds bogus, right? But they CAN negatively affect your score just for checking it. The right websites should advertise that they don’t have a negative impact.
5. Save a House Deposit
House/apartment/townhouse/shed whatever – let’s not get too specific on titles. Basically save for a deposit that will allow you to purchase a home that will one day be 100% yours.
Why? Because it is a waste of money to give rent to someone else for the rest of your life.
Yes, you will have to pay back a hell of a lot of interest, but the place will eventually be yours.
Does the rent cost outweigh the interest? I’ve thought a bit about whether it’s worth it to save a bigger deposit or possibly even purchase your house outright. Unfortunately I don’t have all the figures – maybe I’ll attempt a blog post one day with calcs – but here is an interesting forum discussion about this topic in Australia.
It seems to me that if you could get cheap rent and you’re a couple who has good income and doesn’t plan on having kids until late twenties, early thirties, than purchasing a house outright is possible, but it would take commitment.
Personally, if I hadn’t been so keen to move out and my fiancé wasn’t dead set against renting, we could have stayed at our separate parents’ houses and saved a bigger deposit. However, I love our house and it’s location. I’m happy with our decision, even if the interest hurts!
It would be interesting to do calcs with paying your mortgage back earlier too. I think this might even be a weekend project for me to math it out.
However, most Australians purchase a house with only a 20% deposit because they want to live in their own home as soon as they can. No restrictions, able to have pets, can renovate, and the personal satisfaction.
Have a think for yourself and do what is best for you. The best goal is to own your own one day, however how long you save is up for debate.
6. Pay Your Mortgage Off Early
This one is almost a no brainer. The earlier you pay off, the less interest you pay in the long run. Interest is as dead as rent is.
Some loans even have a redraw facility if you run into trouble and need that money – but the trick is to never use it! Otherwise you’re not really paying your mortgage off earlier.
7. Invest in Shares
Shares is a financial goal that takes research, patience and savings. You can invest with very little, but you probably won’t make much money unless you are very lucky. Or it will take a long time to make enough money off the dividends if the share price doesn’t do much.
While you are saving the money to invest, research by reading blogs, listening to podcasts, watching youtube videos. The options are endless these days on where to get information. Even if you end up going through a stock broker, being educated will help you know if your investments are working and just to have an informative chat.
Shares work to earn you money in two ways
- You purchase shares at one price and sell them when the price is higher. This is where shares are risky because you don’t know how the stock market is going to go. Only time travellers or seers know! However, with a little know how you can make an educated purchase.
- Purchasing shares, setting the dividends to purchase more shares instead of paying out, and forget about them! Almost like set and forget. This is the method my parents use. After ten years, you’ll have more shares than you started with and hopefully, if their price hasn’t taken a plunge, you’ll have more money than when you started.
Again, RESEARCH is key.
8. Purchase an Investment Property
This is a common stream of investing and passive income that most people think about. It’s simple – save a deposit, purchase another property and have someone else pay off that mortgage. Once it’s paid off, you receive total profit (minus the usual expenses and taxes).
The appeal is that everyone needs somewhere to live. Lots of people still rent and thus, if your location and price is right, you should always have renters.
The thing to think about is – could you pay the mortgage if nobody else is? If you already have a mortgage, you could take on another if someone paid it for you. You may decide the risk is worth it or you might wait until your first mortgage is paid off and then take the plunge.
9. Increase your Retirement Fund
Another no brainer. If you can afford to add money to your superannuation or retirement fund, then do it! Future you, will thank you.
However, this is something my fiancé and I aren’t doing yet. We’re only 25 and still have a major mortgage to pay off. It is better for us to make extra repayments and save on interest, then boost our retirement.
Like with anything on this list, look at your situation and do what’s best for you. Except for budgeting. Everyone should budget 😛
10. Create a Stream of Passive Income
The last item I’ll talk about is how to make your money work for YOU. Wouldn’t we always rather be doing fun things, than making money? That’s why you should strive for some kind of passive income.
Passive income is making money without doing anything. Google it and you’ll find lots of options. A savings account with interest is a prime example. The bank gives you money for keeping your money in the account. You already had this money and yet you’re earning more just for sitting it somewhere.
Now, unless you have a heck load in the account, you won’t make enough passive income to live off it. It will help (especially use high interest savings accounts when saving for things, to give your savings a boost), however you want to try and find higher income streams of passive income.
An investment property is a good idea. Rent of $400 a week, minus expenses and tax, would still yield a decent profit. As long as you don’t owe for a home loan. However most passive income streams take time to start earning a good quid.
To be honest, I’m hoping this blog becomes a passive income stream for me. I will have to continue putting out new content to be in the public eye, but the older blog posts can still earn money and anything they earn is technically passive. Overtime, with enough viewers and a huge library of posts, I could make a decent profit.
Google ways to make your own passive income stream and start heading towards a future where you make money without even trying!
I hope this blog post has helped you decide on some financial goals. If you’re struggling to save money or concentrate on spending less, this should help. Write down your goal, create an inspiration board or phone background.
Keep your goal at your forefront and you will succeed. For longer financial goals you should check in at least once every six months to keep you on track and realise how far you have grown.
To this end, I’ll be doing a blog post in the future of my own financial goals and where we are currently at. Subscribe on the right (on a computer) or the bottom (on a phone/tablet) to see this blog post!
Are you going to set goals? Comment below! I love chatting finances!