Have you set financial goals or a plan?

Written on the 17 January 2023 by Parkside InvestorPlus

In a recent NAB survey of more than 2,000 Australians found some 13% had no financial goals at all and 7% had no plans to cut their spending.

In comparison, 26% placed their financial wellbeing as a top priority, beating out travel plans in the new year. 

If achieving financial wellbeing is a goal, then as the saying goes, what gets measured, gets done.  This is the idea behind setting goals.

At some point, we’ve all been advised (or even lectured), on the importance of setting goals – whether they’re short term (1-2 years), or long term (3 years plus).

Goal setting and success have always gone hand in hand.

The most common goals we might be used to setting are those related to health and fitness.  For example, if you decided to compete in a marathon 12 months from now and you were committed to doing so, you’d most likely set yourself short term goals to build up for the main event such as, daily, weekly and monthly running targets.

By doing so, you will more likely be in shape to compete in the marathon and even completing it.

Goal setting has proven benefits, in all aspects of daily life – personal, professional, and, above all, financial.

However, how many of us go about proactively setting their financial goals – for the coming year, next year, 5 years and even the next 20 years?  And more importantly, if you have set financial goals, how committed are you to them?

My guess is very few of us.

Short term financial goals are fine, saving for a new car, holiday, renovation – however, these types of short term goals will not help with your long term financial security.

The importance of setting financial goals/plan

Setting financial goals is key to achieving success in managing money.

Whether it’s buying a house or car, saving for retirement, or budgeting effectively - having goals in mind can help guide your actions and choices when it comes to money.

It’s important to evaluate what you have now and where you want to go or be financially in the future so that you can make and take the necessary steps to get there.

When creating financial goals, it’s important they are SMART – Specified, Measurable, Achievable, Realistic and Timeframed.

When it comes to health and fitness goals, one or two goal statements might be all that is needed.

However, when it comes to financial goals, a little more effort is needed by way of setting up a financial plan for the longer term.

If achieving financial wellbeing is your goal, that statement alone will not be enough to realise your objective – after all, what does ‘financial wellbeing’ even mean?

A financial plan identifies, organises, and prioritises your financial goals, then outlines the steps you need to take to achieve them.

Notice the first steps of the financial plan, namely:

Identifying, organising, and prioritising your financial goals – in accord with your values.

Your values are your money why – this requires some deep sole searching to answer the question, ‘why am I doing this’.

Creating a financial plan

There are several key elements that are typically involved in a good financial plan.

And although they all affect your money in different ways, their cumulative effect dictates what your financial future will look like.

Here are (some) of the key elements of a sound financial plan and their respective sub-steps.

Budgeting

• Your income sources and expenses
• Your assets and liabilities
• Positives and negatives of your current financial situation
• Education and any other significant expected outlays of money

Retirement Planning

• Post-retirement income estimates
• Post-retirement lifestyle plan

Estate Planning

• Who gets what, when and how much and tax estimates
• Will including Testamentary Trusts, Enduring Powers of Attorney, Enduring Guardianship
• Gifting to charity etc

Tax Planning & Strategies

• Capital gains and income tax returns
• Minimising tax outlay

Risk Management

• Long-term care
• Income protection, disability and life insurance
• Beneficiary and survivor benefit plan
• Annuities

Investing

• Investment portfolio return report & analysis
• Asset allocation plans
• Overview of Super and retirement account investments

Building and implementing your specific financial plan is an integrative process, meaning it takes commitment and investment (time and emotion) from you as well as your financial planner – rarely is it just a statement or two regarding where you’d like to be in 10 years’ time.

At Parkside, we can help you align your aspirations and values with a financial plan so you can meet your financial & retirement goals. It takes more than a single meeting and is an ongoing relationship.