Money goals for the New year
Posted 23 Dec 16 by Damien Passmore
This year appears to have moved quicker than any year previous and before long we will be making New Year resolutions and bracing ourselves for 2017.
You would not be alone if a recurrent resolution of yours has been to save more, or perhaps, to spend less. Many make this resolution but along with ‘I’m going to go to the gym three times a week,’ it can be one that is quickly forgotten as the spending patterns of prior years are replicated.
This being the case, here are a few very basic tips that might assist in making your goals a reality.
Make your goal realistic
Recently a relative of mine who has lived overseas for a decade and has nothing but wonderful memories to show for it, declared boldly that by the end of the year she will have $25,000 saved, her goal being to buy an apartment in the Sydney real estate market.
In our most recent discussion, some 9 months later, that same relative confessed that she has now resigned herself to renting for the duration of her life.
Clearly the goal that had been set has not been reached and it would appear that it was so far from being attained that my relative has become totally discouraged.
Rule number one, therefore is to make your savings and/or expenditure reduction goal realistic. If you have a history of spending all that you earn then start with a very modest goal.
Connected to a realistic goal is a realistic start. A modest start that endures is far better than a big start that fades. For the first year it is far more about the discipline than it is about the amount.
Use compounding returns
Don’t let the amount you save do all of the heavy lifting.
Keep it simple initially and ensure that you are at least picking up a reasonable rate of interest. As your savings grow, however, investment in other asset classes can accelerate your savings.
In a world of record low interest rates the principle of compound interest is not broken, but it is certainly challenged. An investment in shares on a monthly basis removes much of the timing risk of that asset class and is much more likely to deliver superior long term returns than cash.
Use a budget
Whether you are trying to save, or trying to reduce expenditure, the importance of keeping a budget cannot be understated. Set a budget and track your expenditures against that budget on at least a monthly basis.
By checking your progress monthly you will be able to identify where things are going wrong and take corrective action.
While I can’t assist you in getting to the gym three times a week, I can tell you that if you set a realistic goal, start modestly, use compounding returns and keep a budget you can keep your new year’s resolution to save more and/or spend less.