Over two-thirds of Australians made New Year’s resolutions and more than half of these will focus on finances. With “saving more” topping the agenda we have some helpful ways to ensure you achieve your 2012 resolution.  

So how do you set financial goals and stick to them?

Put it in writing

When you write your goals, place them somewhere that you will see them regularly. Ensure you are specific about the dollar amount you wish to save and the purchase you wish to make with the money saved. It can be saving for a holiday, a new car, a deposit on a house, paying off a credit card debt or planning for retirement.  The goal gives you something to aim for and also something to measure.

Break it down

It is essential now to break down each of your goals in to pieces. Establish the goals that are:

• Short-term (less than 1 year): Paying off a credit card debt or saving for a holiday.
• Medium-term (1-3 year): Saving a deposit for a house, investing in shares or property or establishing your own business.
• Long term (5 years or more): Building up your superannuation and investments for retirement.

Make sure you’re realistic with the goal. Set small milestones in your plan so you can see results and maintain motivation. You won’t become a millionaire overnight but with small steps and solid plans it is achievable!

Setup Separate Accounts

Success is simple: “Spend less than you earn.” If all of your money is in one bank account, it is difficult to track your savings. Often if you don’t have a financial plan, you will spend everything you earn. To avoid doing this, setup additional accounts so you can direct funds away from your spending account. Most banks now allow you to name the account – (eg. Holiday fund, new car money). This will help you to stay disciplined and on track to achieve your goal.  

Excel Spreadsheet Analysis

On a monthly or quarterly basis, it is important to track your progress and monitor your savings! Using an excel spreadsheet you can calculate how much you are saving and forecast when you may reach your goal. It might be helpful to see your progress in a graph format so you can visually see your hard work paying off!

If your calculations predict your goal to be unachievable, make sure you re-evaluate your approach and modify your goal. It is very de-motivating to set a financial goal that is completely out of reach.

It isn’t set in stone

Don’t be afraid to modify your goals if circumstances change. Remember that financial goals are simply targets and aspirations. New circumstances may include: having children, redundancy, starting your own business or buying an investment property.

I hope these steps are helpful in achieving your New Year’s resolutions to save. Remember it is never too late to start! If you want further advice or any additional information, please don’t hesitate to contact me, billbeak@kmwaccountants.com.