For many people the New Year is a time of reflection and resolutions. We reflect on the year that has been, and make resolutions for the one ahead.
Savings goals that are set in a fit of optimism at the start of the year can often be forgotten or abandoned weeks or months down the track. Luckily, there are a few simple techniques you can use to set goals and stick to them, ultimately creating long-lasting savings habits. The key is to acknowledge the life cycle of a goal, and follow it through – understand where you’re at now, decide what you want to achieve, create a strategy, make it easy on yourself/remove barriers, and review regularly.
Understand where you are now
Take stock of where you are at financially, right now. What are your projected incomings for the year? What are your outgoings, like regular bills and projected costs? What debt do you have? Do you have any savings? Before you set your goals for the New Year, get a good idea of what your net worth is – the difference between what you own and what you owe. This will help you make informed decisions about what you can and can’t aim to accomplish savings-wise during the year.
Decide what you want to achieve
Make sure your goal is realistic and achievable. It should be high enough that it’s a challenge, but not so high that it is unachievable.
Get specific about what you want to achieve – your goal should be measurable. Rather than saying “I want to save more this year,” specify an amount and time frame: “I want to save $[dollar amount] by [date].” It will give you something to aim for and allow you to create achievement milestones.
Write it down – it is commonly acknowledged that writing goals down and referring back to them regularly is a way to ensure you stay motivated to achieve them.
Set up a strategy
Create a strategy for achieving your goal. Your stocktake will have given you an understanding of how much you can afford to save in weekly, biweekly or monthly intervals. Break the goal down into a series of short term, medium term and long term actions that you need to undertake. Having a list of actions means you can see exactly what you need to do to achieve your goal, step by step.
Set achievement milestones. Celebrating a series of small accomplishments throughout the year will help to keep your momentum going and your enthusiasm high.
The amount you put aside regularly (weekly, biweekly or monthly) should fit within your budget and should not place undue strain on your finances. Sustainable saving is about finding balance between what you put aside and your day-to-day budgeting.
Make it easy on yourself/remove barriers
Do everything you can to make the process of saving easy on yourself. Some great options include:
- Set up a savings account dedicated to your goal.
- Choose an account with a high rate of interest and penalties for removing funds too regularly – this could act as a deterent to you ‘dipping in’ to your savings.
- If you’ve committed to saving a certain amount from every pay check set up an automatic payment from the account your salary is paid into to your savings account.
- Use accounts like YouMoney, which allow you to upload pictures to keep yourself motivated.
- Set saving milestones, and celebrate when you hit them.
- Talk to the people in your life about what you’re saving for and why – support from friends and family can be incredibly helpful.
Review Progress Regularly
Regularly check in on the progress of your savings goals. Staying on top of your finances means keeping a close eye on how you’re tracking, and being flexible and able to adjust to unexpected challenges that may pop up during the year. A monthly, quarterly or 6-monthly review of your progress will let you adjust your strategy where necessary and finish the year on a strong note.
Have you set any savings goals for this year? What are your techniques for making sure you reach them?