With 2018 firmly in our rear view mirror, now is the time we all start thinking about the year ahead. It may have been your brother Harry on Christmas Day, saying that he is sick of spending everything he earns as soon as it comes in, or your colleague Betty at the end of year Christmas Party, mentioning how she is always struggling to come up with rent on time.
Whether you fall into one of these categories, or whether you might be looking to go on holiday, upgrade your car, purchase your first home or start investing for the first time; regardless of what your goals for 2019 are, you are much more likely to achieve them if you have a plan. Here are some of the age old ways to achieve your money goals for 2019.
Set yourself a target
If you are really serious about achieving your money goals in 2019, you need to set yourself a target that you can aim towards. The target you set must be realistic and take into consideration your current financial position, which is primarily based on your income, expenses, debts, insurance, investments and superannuation.
You should then look to track your progress on a month by month basis. To do this, you should enter your assets and liabilities into a spreadsheet on a monthly basis to ensure you are getting closer to your target.
If you are not overly savvy with Microsoft Excel, ASIC’s Money Smart website has an easy to understand stocktake calculator, which can be used to calculate your net assets (assets minus liabilities).
Save in buckets
Now you may be thinking, having a target sounds great, but achieving it is always so much easier said than done. Well, this is when the ‘bucket’ strategy may be able to help.
One very effective strategy you could implement is the 60-20-20 strategy.
In a nutshell, 60% of your paycheck should be allocated into a safety bucket. This bucket is for meeting your regular day-to-day expenses, such as rent/mortgage, food, phone bills, internet, car, clothes, pet food. All the things required for you and your family to live safely.
20% of your paycheck should be allocated towards your savings. These are the funds that will help you achieve the target which you have set. Now, what if you have debt? Well, paying off debt is in effect, saving. You are reducing the negative, which will increase your overall net position. Start by knocking off small debts first, like parking fines, overdue membership fees, then larger debts like car loans. Also, you should be doing whatever you can to ensure your credit card is paid off at the end of each month.
Once debts are under control, you can start to pay yourself. Depending on the target which you have set for yourself, you may start allocating funds into a high interest savings account, start an investment portfolio, or commence additional contributions to superannuation. These are all positive things which will improve your net asset position.
The final 20% of your paycheck is for splurging. Spending money on the things that get you up in the morning and make life worth living to the fullest.
Break that in half and allocate 10% to stuff that makes you feel good straight away. For some, this may be movies, shoes, or exploring new bars and restaurants. The other 10% should be used for splurges that take longer to save for, like overseas travel, cycling equipment, or new golf clubs. You will find that by giving yourself an allowance for spending on fun things, you will actually feel a lot less guilty and probably enjoy them a lot more.
Now you are probably thinking, how the heck do I monitor what money goes into what bucket? Obviously, this is not suggesting that you head to Bunnings and buy yourself an array of buckets to start accumulating wads of cash in. This would be a silly idea on several levels, but the main reason why this would not work is that it would require a high level of commitment and manual effort. Calculating these amounts paycheck by paycheck is just not going to be a sustainable solution!
To make this strategy actually feasible, the transfer of funds should be automated. It will require you to establish different accounts through your online bank, and then setting up regular automatic transfers the day you get paid, before you have a chance to spend the money. If the payments are not automated, then it becomes a harder exercise and chances are, it will not work.
If 2019 is going to be your year to accumulate wealth, knock debt out of the park and propel your financial position to new-found heights, then it’s time you made a plan.
If you are still confused, unsure where to start or just too busy, maybe it’s time to book in for a free no-obligation consultation with a financial planner who specialise in helping individuals achieve their goals and objectives.
Learn more about how a financial adviser can help you by reading Mythbusters: Do I need a Financial Adviser?
* The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.