Set Financial Goals 

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It doesn't matter how much you earn  - the ability to save and invest depends on how you manage your personal finances. Some things you can do to manage your personal finances are: set financial goals, make and stick to a budget, pay off debt and seek professional advice.

Do these things to help manage your personal finances and, if you follow this advice, your financial problems will start to go away and you will benefit from your growing financial freedom. Begin to save and invest no matter how much you earn and you will become richer.

Set Financial Goals 

Take time to write clear, specific, long-term and short-term, financial goals. For example, you may wish to take a year off work and travel around the world. Or you might want to buy an investment property or even retire early. All of these goals can be reached by effectively planning and managing your personal finances. However, to reach your goal of retiring early you will need to save your money now. Achieving other goals, including buying a home, having children, buying your main residence, or a holiday home, will also depend on how you manage your money today.

Think about what you want to be able to afford and write a list of your financial goals.  Put them into a priority to help you concentrate on what is most important to you now, and to ensure you plan properly. Organising your goals like this and writing them in the order you wish to achieve them helps you work towards the bigger, more expensive goals whilst managing to reach your short-term, less costly goals too.

To control your finances and reach your financial goals, you must:

  • Set long-term goals like clearing a debt and buying a home.
  • Set short-term goals, like going on holiday, or buying a computer or car.
  • Prioritise your goals to create a financial plan.

A financial plan is necessary to help you reach your financial goals. The plan should have milestones to help you see when you will be able to afford your goal, or clear a debt, for instance. When building your plan include all your regular payments and expenses, being detailed and honest with yourself. The more detail you include, the more your plan will reflect what you spend and help you manage your finances quickly and achieve your goals.

Once you’ve set your goals and written your plan, and followed it for a few months, you will begin to see that you have money to reach your goals. Don’t forget to keep an eye on your priorities and review what’s most important to you now. Remember - this might change as time passes, so be prepared to review your plan. Keep working towards your long-term goals, but also focus on the important short-term goals too, to help keep yourself motivated.

Your financial plan should also foresee life’s unexpected expenses, so don’t forget to put aside contingency funds, or an allocation to use in case you need to buy something unexpectedly – a new washing machine for instance. By doing this you will be able to continue saving and investing consistently, and keep control of any situation that may arise.

Remember your budget is the single most important aspect to taking control of your finances. Having a full and accurate budget, and sticking to it, will give you the secure financial future you desire. A budget that works will help take control of your finances, whilst regular saving and investing will help you reach your goals, and building up contingency funds will help you build and maintain progress towards your financial freedom.


Make and Stick to a Budget

Your budget is an important tool to help you succeed financially. It is a spending plan that allocates money to help you reach your goals.

The purpose of your budget is to prevent you from spending more than you have, helping you clear debts, build up contingency funds and reach financial freedom. The level of detail you include is up to you but you may find it useful to include more detail to begin with and reduce it as you become better at managing your finances.

A budget will show you where you spend your money and help you find areas that you may choose to manage differently or cut out completely in favour of reaching more important goals.

Pay off Debt

Debt should be reduced as quickly as possible to help you reach your financial goals sooner. Make clearing debt a priority and pay all debt off as quickly as you can. If you can, consolidate all your debts into one, and negotiate a more favourable interest rate with the lender. And do so as soon as you can. If this is not possible, reduce all your separate debts by making payments to all of them, but pay more to the debt that has the highest interest rate. Use any spare money you have to pay back a debt.  Once you clear one debt, channel the money you were paying into the next debt to clear that one quickly too. Once you are out of debt, keep it that way!


Seek professional advice

Once out of debt and you have more money to save, consider investing to reach your financial goals. Now is the time to speak to professional advisers to help you make wise investments.

Saving and investing are terms that are sometimes confused, but there is a big difference. Saving is putting aside money to pay off debt, prepare for emergencies, or for a future purchase (financial goal). Investing is buying assets such as shares, bonds, mutual funds, or real estate which will grow in value and make money for you.

Best practices: which part of income should you save and invest monthly?

A general rule of thumb is to dedicate between 20% and 30% of your income to saving and investing. Half of that should probably go towards the long-term plans you have for when you retire. 

How much will you have in 25 years if you save 100 per month in the bank vs how much you have if you save and invest too?

Saving a small amount each month is where your journey to financial freedom begins, as well as keeping control of your spending. However, if you only save you will not receive the gains and growth that investing can bring.

Some ways to help you save are to: set up a direct debit, ask your employer to pay into your current account and savings account directly, make use of apps

  • Set up a direct debit:  move a fixed amount of money from your current account to a savings account each month on a fixed date. By doing this each month with just 100 a month will have accumulated 1200 by the end of the year.
  • Ask your employer to make a direct deposit into your savings account: Instead of having your whole salary paid into your current account, ask your employer to split your salary at source and pay into a savings account too. That way you will get used to managing your budget and save at the same time.
  • Maximise the use of technology to make every saving you can: There are many apps available to make all your money work for you so make use of them where you can. Remember, everything you save and invest in now goes towards reaching your financial goals and ultimately financial freedom.

It’s not important what percentage of your salary you save, consistency is key! If you save small sums regularly, you will build savings over time to achieve your goals.
Investing can bring returns that are much greater than just saving.