How to set financial goals and actually stick to them
There’s a big difference between saying ‘I’m going to save up R1 million’ vs ‘I’m going to put aside R5000 a month for 9 years’.
The first option immediately seems rather overwhelming. The other, although a significant amount, seems more doable. The lesson? Be realistic. The bottom-line is that 92% of us struggle to achieve the New Years’ resolutions we set. Setting attainable goals and making sure we are thorough in listing the plan to achieving them will determine our level of success.
According to Francois Viviers, Executive: Marketing and Communications at Capitec Bank, “Setting financial goals at the beginning of the year is incredibly important. While many people may be tempted to take 2019 as it comes, without a proper financial plan you’ll likely spend money on things that don’t actually matter and miss your goals.”
Financial goals, backed by a plan, give you a road map to follow. It also allows you to select the best financial tools to use when achieving your goals. For instance, keeping your money in a cheque account will earn you no interest. Placing your money in a savings plan will on the other hand put the power of compound interest in your corner.
Here, Viviers shares some approaches and tips to achieving your financial goals for 2019.
Goal 1: I’m going to save more
How to make it work: Pay yourself first. Many people save by placing the money they have left over at the end of the month into a savings plan. You’re likely to save very little this way. Rather setup a recurring monthly payment and transfer the amount you’d like to save into your savings plan before spending any discretionary income.
Personalise your savings plans and name them after the goals you are saving towards. This way when you log onto your banking app you have a bird’s eye view of your progress.
Not all savings plans are created equal. Compare interest rates offered by banks.
Goal 2: I’ll cut down on my spending
How to make it work: Get up close and personal with your bank statement. Firstly, interrogate your monthly debit orders. Do you really need all the subscriptions you have? You may not be using those video or audio streaming services as much as you think. It’s also possible to cut back on the cost of some debit orders. For instance, if you feel you have managed your insurance policy well, call your insurer and see if they are willing to offer you a better rate.
Secondly, take a look at your disposable income. Where does your money go exactly? And how can you cut back on non-essential spending? For instance, a trip to the movies could set you back almost R140, while renting a movie at home and making your own snacks could lead to a R70 saving.
When cutting back on spending most people overlook the cost of their bank fees. Check your bank statement to see what you are paying. Most bundle accounts cost from R100 per month. Do you really need all the services offered in the bundle? With a pay as you transact account.
Digital banking transactions are often more affordable than those involving cash or branch visits. Make sure you are making full use of your bank’s app. Not only will it save you money but time too.
Goal 3: I’m going to make more money
How to make it work: Have a side hustle. Your corporate 8am – 5pm salary does not need to be your only source of income. Technology is making it easier to earn an income from the additional resources you have. For instance, Airbnb lets you rent out an unused bedroom in your house and many apps exist that allow you to rent out excess storage space.
Have a look at the things you own and then ask yourself, “Could these earn me extra money?”
Place the money you make from your side hustle into a savings plan rather than using it for everyday items such as clothing or movie tickets. The money will then earn interest and you’ll have additional money to grow your side hustle, increasing your earning ability.
Goal 4: I’m going to pay off all my debt
How to make it work: Not all credit costs the same. Store and credit cards often have higher interest rates than other credit. Use extra money to pay off these loans first. Consolidating your debt into a single loan with a lower interest rate is also a good way to save money.
Shop around to see which bank gives you a better interest rate on your loans and credit cards. Capitec’s credit card offers interest rates from 10.25% and personal loans are offered from 12.9%.
Remember your financial behaviour affects your credit score, which determines the interest rate you will pay. Make sure you always pay accounts on time and review your credit score each year.
Goal 5: I’ll do better with managing my finances
How to make it work: Tech! There are amazing apps for all aspects of personal finance these days. Whether it’s making good use of your banking app to track spending or downloading a household budgeting app, introducing a new, clever tool or two into your personal money management is likely to bring bigger success than just resolving to “do better”.
The Capitec app saves you money, as many transactions are free or priced at a lower cost than at a branch. The app also uses zero-rated data, which means you won’t be billed for the data used.