When you set financial goals for yourself, it’s easy to get excited. Everyone likes the prospect of getting rich, retiring early, and enjoying life without worrying about money. Imagine not needing to visit a money lender Singapore, as you will have enough for both your needs and some wants.
It’s easy to become unrealistic in setting your financial goals, though. When your goals are hard to reach, you would only set yourself up for disappointment. Here are five guidelines for finding the right pace for your financial goals.
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Assess your financial situation
The first step is to find out where you are financially. Take a look at your income, expenses, current savings, and debts if you have any. Remember these two rules of thumb:
- Live below your means.
- Prioritise paying off your debts.
Living below your means is the best way to make sure you always have money left before the next paycheck comes in. It means your expenses are always smaller than your income. If you find any unnecessary expenses, you can eliminate them and save money.
Also, you need to make getting out of debt a priority. The sooner you can pay off your debts, the better you will be financially. The longer you take to pay off debts, the more you will end up paying in interest. This adds up quickly, and interest will easily eat through your budget.
But if your loans are fully repaid as soon as possible, you will have no more interest to pay every month. You can then save or invest the extra money you will have.
Create specific and realistic goals
Make sure your financial goals are both specific and realistic. For example, instead of saying, “Save money regularly”, you can say, “Save $500 every month.” Put a number and a time frame on each goal.
Also, find out whether the timelines you set for yourself are realistic. For instance, it may not be feasible to “have $1 million in savings by the time I turn 25.” While it’s nice to have big goals, adjust them according to your income and what you can project your income to be in a few years.
Unrealistic goals will only disappoint you later on. But if your goals are achievable, you will feel much more fulfilled once you reach them.
Use budgeting tools
Budgeting apps and spreadsheets are your friends here. These tools help you create a budget, track your expenses, and keep an eye on how much money you have in your bank accounts. You can even set spending limits so you don’t go over your budget.
Tracking where your money goes may be tedious, but it’s necessary to put your finances in order. You need to know exactly where each dollar goes. This way, you can find ways to reach your financial goals sooner.
Automate saving and investing
Savings and investments are often neglected parts of personal finance. How many times have you ended up saving very little—or none at all—because you realise you’ve already spent most of your money? Saving should actually be done first before any spending. Instead of spending first and saving what’s left, you should save first, then spend what’s left.
Determine a percentage of your monthly income that you’ll set aside for savings and investments. Then, automate these through your budgeting or banking apps. For example, if your savings goal is $500 per month, you can set your banking app to automatically put away $500 every payday into a separate savings account. This way, you will no longer end up spending the $500 you want to save.
The same principle applies to your investments. Automate them, and you no longer have to think about them each time you receive your monthly salary.
Invest in financial education
Speaking of investments, a good one would be on resources related to personal finance and building wealth. It’s always wise to increase your knowledge on these topics. Buy books, attend conferences, and even hire a personal financial advisor.
These are investments you make for yourself. As a result, you will be better equipped to reach your financial goals. Once you’re skilled enough, you can even help others reach your level.
Conclusion
Setting financial goals is an exciting prospect, but it has to be properly paced. Set realistic goals according to your financial situation. Don’t rush; do it right, and you will reach those goals soon enough.