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How to set financial goals and actually stick to them

Five smart tips to simplify your financial goals, saving time and money.

There’s a big difference between saying ‘I’m going to save up R1 million’ vs ‘I’m going to put aside R5 000 a month for nine years’. The first option immediately seems rather overwhelming. The other, although a significant amount, seems more doable. The lesson? Be realistic.

The bottom-line is that 92% of us struggle to achieve the New Year’s resolutions we set. Setting attainable goals and making sure we are thorough in listing the plan to achieving them will determine our level of success.

Setting financial goals at the beginning of the year is incredibly important. While many people may be tempted to take 2019 as it comes, without a proper financial plan you’ll likely spend money on things that don’t actually matter and miss your goals.

Financial goals, backed by a plan, give you a road map to follow. It also allows you to select the best financial tools to use when achieving your goals. For instance, keeping your money in a cheque account will earn you no interest. Placing your money in a savings plan will on the other hand put the power of compound interest in your corner.

Here are some approaches and tips to achieving your financial goals for 2019.

Goal 1: I’m going to save more

How to make it work: Pay yourself first. Many people save by placing the money they have left over at the end of the month into a savings plan. You’re likely to save very little this way. Rather setup a recurring monthly payment and transfer the amount you’d like to save into your savings plan before spending any discretionary income.

Top tips:

  • Personalise your savings plans and name them after the goals you are saving towards. This way when you log onto your banking app you have a bird’s eye view of your progress.
  • Not all savings plans are created equal. Compare interest rates offered by banks. Capitec’s savings plans earn from 5.1 to 9.25% depending on the amount and period.

Goal 2: I’ll cut down on my spending

How to make it work: Get up close and personal with your bank statement. Firstly, interrogate your monthly debit orders. Do you really need all the subscriptions you have? You may not be using those video or audio streaming services as much as you think. It’s also possible to cut back on the cost of some debit orders. For instance, if you feel you have managed your insurance policy well, call your insurer and see if they are willing to offer you a better rate.

Secondly, take a look at your disposable income. Where does your money go exactly? And how can you cut back on non-essential spending? For instance, a trip to the movies could set you back almost R140, while renting a movie at home and making your own snacks could lead to a R70 saving.

Top tips:

  • When cutting back on spending most people overlook the cost of their bank fees. Check your bank statement to see what you are paying. Most bundle accounts cost from R100 per month. Do you really need all the services offered in the bundle?
  • Digital banking transactions are often more affordable than those involving cash or branch visits. Make sure you are making full use of your bank’s app. Not only will it save you money but time too.

Goal 3: I’m going to make more money

How to make it work: Have a side hustle. Your corporate 8am to 5pm salary does not need to be your only source of income. Technology is making it easier to earn an income from the additional resources you have. For instance, Airbnb lets you rent out an unused bedroom in your house and many apps exist that allow you to rent out excess storage space.

Top tips:

  • Have a look at the things you own and then ask yourself, “Could these earn me extra money?”
  • Place the money you make from your side hustle into a savings plan rather than using it for everyday items such as clothing or movie tickets. The money will then earn interest and you’ll have additional money to grow your side hustle, increasing your earning ability.

Goal 4: I’m going to pay off all my debt

How to make it work: Not all credit costs the same. Store and credit cards often have higher interest rates than other credit. Use extra money to pay off these loans first. Consolidating your debt into a single loan with a lower interest rate is also a good way to save money.

Top tips: 

  • Shop around to see which bank gives you a better interest rate on your loans and credit cards. 

Remember your financial behaviour affects your credit score, which determines the interest rate you will pay. Make sure you always pay accounts on time and review your credit score each year.

Goal 5: I’ll do better with managing my finances

How to make it work: Tech! There are amazing apps for all aspects of personal finance these days. Whether it’s making good use of your banking app to track spending or downloading a household budgeting app, introducing a new, clever tool or two into your personal money management is likely to bring bigger success than just resolving to “do better”.

Francois Viviers is executive: Marketing and Communications at Capitec Bank. 

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COMMENTS   9

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Rather than another side hustle, the best source of additional income is to grow your salary generally. Making 10%-20% more on a decent salary is way better than a side business bringing in a few extra Rk a month. Education, ambition, work ethic and career switching are all still rewarded, even in SA.

WRONG ! It would take you 2 – 3 years to get that additional 10% and INFLATION WILL EAT YOU UP. The old saying of you don’t get wealthy by working for someone else comes to mind! You have been indoctrinated by education. Get a good education and work for “someone else.” That’s what they teach

I’ve been through both so am only able to refer to my personal experience, yours will likely differ. I found doubling your salary from a lowish base of say R50k to R100k pm is far easier (more education/career switch) than the alternative of having a job of R50k and building a side business of R50k (no time left), or building a business of R100k pm. Like I said, that is just my own experience, yours will differ.

Inflation matters, but that is under all situations as you need to keep pushing for an annual 6%+ increase anyway.

Of these tips, paying yourself first is the most powerful. Throughout my working life – I am a retiree – I paid myself 30-50% of my salary and taught myself how to invest in the stock market. Life was spartan for the first few years but soon my investments made things easier and within 20-25 years I was financially independent. Luckily I loved my job so continued with that through to 65 but hardly worked a day in my life. I cannot for the life of me get my spendthrift kids to do the same or even a scaled-down version.

I feel your pain momo.

Best regards.

From: 70 this year.

Thanks pacaratac. Seems the psychologists are right. People are more likely to learn their values from their peers than their parents.

‘Not all credit costs the same. Store and credit cards often have higher interest rates than other credit. Use extra money to pay off these loans first.’

An appealing view based on arithmetic. Another view more relevant to today’s very uncertain and dangerous times is:

Rather focus on those debts that cover assets that you would least like to lose. If you default on clothes and furniture the finance company takes those back……..in practice do they sue for any shortfall on the debt? Comments appreciated.

Do not put your house at risk even though the financing costs may be lower. A house takes time to sell and there ae significant costs involved. To prematurely terminate a car lease not so much and it is quick and easy to scale down to get a viable car to get to work in.

I love reading “marketing executives” who write about things they know VERY LITTLE about! These are feel good traits and that’s where they end. Banks have not beat inflation (the real inflation #) in over 20 years. Why save @ 5% (and you won’t get any real interest until you keep R 20,000 a month IN YOUR ACCOUNT) and pay 9.5% on a bond? Pay 14% on a car? Pay 19 – 25% on credit cards? And the 20 K will make you enough interest TO PAY YOUR MONTHLY FEES!Again you made nothing! So there’s your bank savings OR as I teach bank losings!! So send ion more of these experts. DR. Debt

In controlling expenses, it helps to set up a record of where you are currently spending your money. Create a spreadsheet and categorise all your expenses over at least a year based on exported electronic bank statement. These categories will vary from relatively fixed expenses to once off expenses and varying expenses. The most onerous for me is grocery expense. I’m an amateur modeller but I’ve figured out that groceries follow a chi-square distribution and calculating the mean or the mode gives an approximate estimate for where your grocery bill for the month will fall. You can incorporate this into your budget for the following year adding inflation. Create a total budget from the categories. Keep disciplined to your expense program, but in planning you have to be realistic too. That is why statistical modelling helps. You can at least calculate the variance of your expense categories to give you an idea of how much you may exceed your anticipated spending. Then incorporate it into a budget. Budgeting really helps with spending discipline. And you can make quite a science of it.

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