Are you good with money? If so, you’ll know how satisfying it can be to decide what you want to achieve, plan how to get there and then sit back to watch your money grow.
But for many of us, it can be almost as tough to stick to money goals as it is to carry through with our intentions to get to the gym more often, give up chocolate or go to bed earlier.
Some types of goal-setting can backfire. Consumer psychology research from the USA, suggests common mistakes made in setting money goals include:
- making your goals too easy, which means they’re unlikely to make a real difference to your future.
- making your goals too hard, which tends to make people spend even more than if they’d never set goals in the first place.
Try these tips to create worthwhile money goals you’ll actually keep to.
Set SMART goals
The SMART system can help you clarify your ideas, focus your efforts and give you a clear path to success.
When you set your goals, make sure they are:
For example, if you know you’ll need to replace your car within the next couple of years you might decide to set up a direct debit into a savings account every payday.
Using the SMART system, you’ll have calculated exactly how much money you’ll need to save (Specific), how you’ll track your progress (Measurable), how you’ll cut your expenses to be able to make each payment (Achievable), what kind of car you’ll be able to buy with your savings (Realistic) and how long you’ll be saving for (Time-bound).
Take advantage of the quick wins
Not all goals have to be long-term – small changes can make a big difference to your financial future.
Simple short-term goals you might like to consider include:
- Reviewing your KiwiSaver account to find out whether you’re in the right investment fund for your stage of life. KiwiSaver scheme providers may offer several different types of investment funds, ranging from more conservative lower risk funds to higher-risk growth funds.
- Setting up separate bank accounts for essential spending, non-essential spending and saving. Some people find separate accounts can be a useful way to help them avoid debt, live within their means and develop a savings habit.
- Making a regular date with your partner to set money goals and agree how to achieve them. As well as preventing money-related arguments, joining forces can help you to achieve your goals more quickly. If you’re looking to buy a home together, for example, you could both be entitled to make a first home withdrawal after three years of being in KiwiSaver.
- Taking some time to review what you’re spending on power, mobile phone, internet, insurance and credit cards. Could you get a better deal?
- Deciding whether any personal finance tools might help you stay on track with your goals. There are lots of choices out there, from budgeting tools like whostolemymoney.com to simple goal-setting apps like Productive.
SMART goal-setting can help you plan your immediate goals, but how will you know whether you’re taking the right steps to reach your ultimate target – the comfortable retirement you’ve worked so hard for?
If you’re a Kiwi Wealth KiwiSaver Scheme member between the ages of 18 and 65, who hasn’t made a transfer from an Australian complying superannuation fund, our Future You* tool can help you monitor how you’re tracking towards retirement.
Select one of three retirement lifestyles – no frills, flexible or deluxe – and fill in some details about yourself and your KiwiSaver account. (And if you already have a good idea of how much your retirement lifestyle may cost you, you can also set up a custom goal.)
Every time you login to your account, Future You lets you see your estimated retirement income, shows how you’re tracking towards your goal, and enables you to make spot changes to your KiwiSaver investment.
If you already know how much you spend each week, you can also use Future You to create your own customised goal rather than selecting one of the three suggested lifestyles.
And don’t hold back from sharing your new money goals with close friends and family! Research shows that sharing your goals with others can help motivate you to succeed.
* The Future You tool is available to members who are aged between 18-65 and who have not made a transfer from an Australian complying superannuation fund.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any investment decisions.
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