5 Great goals for the new financial year
The start of the new financial year is a great time to consider what you want to achieve financially over the coming months. It’s a great idea to set yourself goals so you have something to focus on and work towards. Below we identify 5 goals to set yourself up for a great year.
1. Get Out of Debt – Completely
The great thing about this goal is that anyone can do it, regardless of income or wealth level. And if you want to get the most out of your finances, it’s virtually a requirement that you get out of debt.
For the moment, let’s ignore the good-debt-versus-bad-debt debate. At some point in your life, all debt is bad debt and needs to be paid off. That includes the mortgage on your home. Although the purpose of that debt may be noble at the beginning, it’s no less a drag on your income than any other debt as time goes on.
There are more reasons to get out of debt than I can list here, but here are just a few of them:
- Getting out of debt means that you’ll have full control over your income – and that’s an incredible feeling
- It will leave you with more money for savings and investing – and even more for spending
- It will remove the asterisk from your finances – I make $X,000 per month, but $X00 has to go to pay my debts
- It will make it easier to quit a job you don’t like
- It will free your mind of the worry and stress that come with debt
2. Plan For Early Retirement
When I started as a financial advisor and finally grasped the concept of compound interest, I was determined to put myself in situation where I could retire by the age of 50 if I wanted to. I don’t know if I’ll ever really retire, because I absolutely love what I do.
Even if you absolutely love what it is you do for a living, planning for early retirement is one of those top rated good financial goals.
- Reaching your retirement goals may take longer than you think; if you plan to retire at 50 you’ll have plenty of time to make it by 65 in the event that you hit a few snags
- Poor health could make early retirement a necessity – if you’ve planned and prepared to retire early, then you will be ready
- Family circumstances often require more of your time, and early retirement will help you to have it
- Though you may not want to fully retire early, you may decide that you would like to downshift and not work so hard
- It’s better to be able to retire early and not need to, than to need to retire early and not be able to
There’s one other advantage to planning to retire early, and it’s a big one. By working toward early retirement, you will be front-loading your retirement investment portfolio. That will give you a larger portfolio early, which will mean that you won’t have to work so hard saving for retirement later in life when doing so may be more complicated.
3. Have a Well-Stocked Emergency Fund
We normally think of having an emergency fund as being a short-term financial goal. And from a mechanical standpoint, that’s true. However, an emergency fund has important long-term benefits, which is why it’s one of the good financial goals that you should plan to achieve.
Here are just some of the benefits that a well-stocked emergency fund can provide you with throughout your life:
- It can take away a lot of the money worries that you have, since you know that you will always have a reserve should you get into a tight spot
- As is expected of an emergency fund, it will be there to cushion the blow in the event of a sudden emergency, such as a job loss or a large medical expense
- It’s an important money management tool – if you can save money for an emergency fund, then you can save money for any financial goal that you have
- It provides you with an intermediate funding source – a kind of halfway point between your paycheck and your investment accounts – that you can use so that you don’t have to disturb your long-term investments
- Just having an emergency fund will make the wide swings in the stock market more emotionally tolerable, knowing that your survival isn’t at stake when the market falls
For us, having an adequate emergency fund has offered reassurance in many life situations. Most notably was having our first son, building our dream home and starting my own investment firm.
When you consider all that comes from having a strong emergency fund, it should move it up the priority ladder a few rungs.
4. Be Able to Live on Less Than You Earn – No Matter What
I’ve covered this topic in other articles, but it is well worth repeating here since it is one of the most necessary of all good financial goals. By learning to live on less than you earn – no matter what – you will always have plenty of income. That means that you’ll have plenty of income for savings, investments, and for paying off debt.
It’s important to always be on the hunt to increase your income. But that strategy will only be effective to the degree that you are able to live on less than you earn, so that you can put the difference to better use to improve your life.
5. Have Enough – But Not Too Much – Insurance to Cover Contingencies
Insurance is something of a tough call. A lot of people don’t have nearly enough coverage, while many others are paying too much for the coverage that they have. Striking a balance between the two is another of those good financial goals.
Here are some strategies in striking that balance:
- Where life insurance is concerned, stick with term life insurance – it’s cheaper so you can buy as much as you need. Just make sure that you’re not buying so much life insurance that you’ll be worth more dead than you are alive; it’s just an expense you don’t need to carry
- Unless mandated by state law, look into the carrying the lowest level of auto insurance possible, particularly if you have a long history as a safe driver
- Take the highest deductible you can on your health insurance, and make up the difference with an emergency fund that is large enough to cover that deductible – if you seldom use your health coverage, you’ll be way ahead from the lower premiums
Part of your goal should be to work with a knowledgeable insurance agent on a regular basis to make sure that you have just enough – but never too much – insurance coverage.
If you would like to discuss your personal financial situation and receive help and support to reduce your tax, pay off debt and improve your personal financial situation give us a call today and we will be happy to help.