Five financial goals and how to achieve them

The new year is the perfect time to hit reset on your financial goals. Whether you’re an experienced investor or just starting out on your money journey, everyone has action steps they can take to improve their finances. So, let’s take a moment to consider some of the best habits we can form when it comes to our finances.

“The goal isn’t more money. The goal is living life on your terms.” — Chris Brogan, author, and social media marketing consultant

1. Make (and stick to) a budget

Finding a budget that works for you is a bit like finding that perfect pair of jeans — it’s difficult! Budgets are not one size fits all, no matter what people try and sell you on social media. So, take a weekend, a piece of paper and a pen and make a list of all the money coming in and going out of your bank account. See if you can trim your outgoings to increase the amount you can save. The best budget is ultimately one that works for you, so it’s okay if it takes a few different tries to get it “just right”. And remember: everyone budgets. They may not write it down each month and account for every pound spent, but everybody – in some way – has a budget.

Next steps: consider your future self, aka emergency savings, life events and retirement options

2. Build an emergency fund

Now you have a budget, but did you remember to include your emergency fund in the equation? If the last year (or two…) has taught us anything, it’s that life can be messy and unpredictable. The amount you need for an emergency fund is debatable but most people say that it should be enough to tide you over for 3-6 months if money dried up completely through redundancy or illness. At least it is something you can easily calculate now you have your new budget! Ultimately your emergency fund should bring you peace of mind.

Next steps: focus on paying down your debt or planning for life’s “next steps”

3. Be debt-free

Easily the top New Year resolution I saw this year. The unpredictability of the last few years has meant that a lot of people relied more heavily on credit cards and loans to get by. Depending on your starting point, this could be a multi-year effort – and that’s okay!) – it just requires some interim steps and be sure to celebrate small milestones along the way.

The first step is to get a super clear picture of exactly what you owe, at what rates, and by when you need to pay it back. Then assess your personal situation. What can you afford to “overpay”? Just meeting minimum payments isn’t enough to get out of debt – all that does is pay off the interest. (Hint, reference your budget!)

Then decide on your “method” – should it be the snowball method or the avalanche method? Without going into too much detail, the snowball method focuses on repaying the smallest debt first and working your way up (regardless of interest rate). This is good for people who like to see progress quickly. The avalanche method focuses on paying off the debt with the highest interest rate first. This results in less interest paid – so reduces the overall amount you are paying back, but can take longer to achieve.

Next steps: if you’re going to be focusing on debt for an extended period, it’s a good time to brush up on your financial education. Try starting with our introductory guide to investing. If you’ve got your debt under control, it’s probably time to start thinking about life’s “next steps” aka starting a family (and how to afford it) or buying your first home

4. Plan for major purchases

If you’re ready to start a family, buy a home or another major purchase, it’s time to get your finances in order. Savings are just one part of preparing for these big spends. If you’re looking to start a family, find out your maternity/paternity/adoption leave pay so you can plan accordingly and adjust your budget. Looking to buy a home? Review your credit report and understand the picture that a lender would see. Explore pre-qualifying for your loan with your lender.

Next steps: start investing and planning for retirement

5. Start investing

Hopefully, by now I’ve convinced you to at least consider investing and what better time than a new year? 365 blank pages and all that. If you’re new to investing, start small.

Choosing an investment fund can be a tough decision but getting it right (or wrong) can have a huge impact on your money. So you might want to have a quick look at our short guide on how to choose a fund.

To get you started, here are the most viewed funds and trusts amongst millennial visitors in 2021*

  1. Baillie Gifford Global Discovery
  2. City of London Investment Trust
  3. Scottish Mortgage Investment Trust
  4. Fidelity China Special Situations
  5. First Sentier Global Listed Infrastructure
  6. Jupiter UK Smaller Companies
  7. Ninety One Global Environment
  8. IFSL Marlborough UK Micro Cap Growth
  9. Artemis Income
  10. BMO Global Smaller Companies

P.S. If your New Year resolution is more self-care read why financial education is an important form of self-care too

P.P.S. Don’t forget to review our three saving tips, tricks, and funds for 2022

*Source: Google analytics, FundCalibre visitors aged 25-44

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.