Setting up financial goals within realistic and achievable time frames is a very important part of achieving your financial independence. In order to achieve your goals you will need to make a plan and stick to it! Most Aussies will likely have short term and long term goals. You need to figure out what is within reach and what is important to you and create a realistic plan to follow.
Some examples of short term financial goals to achieve in the next 12 months might be the following:
Short Term Goals
1. Making a written budget and sticking to it. Once you visually see where your money is going each week or month it will help you identify where you can cut expenses. Even reducing your discretionary spending by $150 each week will save you $7800 over the course of the year.
2. Paying off Credit card debt. This should definitely be on your short term goal list. We all know the interest rates on credit cards are extremely high and compounds very quickly if payments are being missed. If you have multiple credit cards you might want to investigate some sort of debt consolidation with a lower interest rate to make the debt easier to track.
3. Save for an emergency. As much as we can reduce our discretionary spending, there will inevitably be an unexpected bill that pops up sooner rather than later. An emergency fund is generally advised to be enough savings to last you for 3-6 months of living expenses. You never know when a job loss or unexpected car repair might pop up. Having this fund will ensure you can avoid relying on a credit cards or pay day loans for an unavoidable bill.
4. Find ways to increase your income. Whether that means getting a second job, starting a side hustle, doing some adhoc work, the more you can earn means the more you can save. Do some additional job training or aim for a pay increase in your current role. Anything additional to your main source of income that you can earn, dedicate it to paying down debt, savings or investing.
Long Term Goals
1. Adding extra money into your Super fund. If you are able to enter into a salary sacrifice agreement with your employer, look into how this can benefit you. You can also boost your super by adding your own contributions to your super fund from your after tax income. Call your super fund and ask them about the options available to you.
2. Saving for a house deposit OR paying off your mortgage early. There are a lot of for and against arguments for paying out your mortgage early in Australia. Having a home loan does mean you have access to a cheap line of credit which you can use to purchase a rental property or put into other investments. However for the average person who is interested in the financial security of owning their own home, there is no greater feeling then transferring that last mortgage payment to your bank. The security of knowing that the bank no longer owns any part of your home and no one can take it away from you is an incredible feeling.
3. Starting a Business or following your passions. Financial security does allow us to be more flexible when it comes to our employment options. If you have no debt and substantial savings you are in a much better position to consider changing jobs and taking a pay cut. It’s easy to get trapped in the cycle of working at a job we hate because the pay is too attractive to leave.
4. Investing in Shares or ETFs. The stock market is a valuable tool in building long term wealth and the earlier that you start the better off you will be. Most people view shares as too risky or complicated to put their hard earned money into. After all we should not invest in what we don’t understand. But there are so many resources out there where you can start to learn what an ETF is and how it works. You only need to start off small when it comes to the share market unlike property investment where the start up costs are a lot higher.
So start planning your goals! The best time to work towards financial security was yesterday!
