“Freedom and wealth is an outcome of “Time”; the most precious asset that we all possess. Time however is a variable to each individual as our actions from our choices determine the longevity and returns from this asset. To maximize the return on this asset is determined by the energy that we put forth in developing our financial education, relationships and health.”
In your twenties your future is too far away to think about and what is important is the “here and now”.
Your financial habits are not great, as you will have probably maxed out your credit card, delayed any savings and focused mainly on pleasure spending.
Your twenties are the time to have fun and its ok to make financial mistakes. However, the bad financial habits that you have accumulated in your twenties need to be gone before you head into your thirties.
Being in your thirties is different, you become more responsible and yes a little more serious about life.
Living in a cold damp house where it was party central every weekend doesn’t seem so appealing. The comforts of a warm centrally located apartment with your partner or a flatmate is the place you really want to be. You start to drink wine and your parties go from 100’s to dinner parties of 6! No police get called to your dinner parties!
You will find that children, family, marriage, buying houses are the main topics of discussion amongst your friends.
Shopping. Bills. More bills. Your health. Appointments. Money. Credit cards. Rent. Mortgages. Tax returns. Work. Some of these things were present in your twenties, and if you really wanted to ignore them you could but now you can’t.
If you make the right financial choices in your twenties, many of the thirty something life events become not so stressful and far more pleasurable. The reason why,is because you have a good financial base!
However, if you don’t make the right financial choices in your twenties, your life will be one of financial struggle – not only in your thirties but for ever.
“Money is only a tool. It will take you where you wish, but it will not replace you as the driver” Ayn Rand
By pursing these 10 Financial Goals before you reach 30, you will have set the foundation for you to enjoy financial security and independence for the rest of your life.
1. Know Your Personal Financial Profile
“When it comes to money and so many other things in life, understanding your weaknesses and strengths can help you with your future plans.” Tagene Brown-McBean
I know that this doesn’t look like a financial goal however it is the key to your success in achieving your financial goals. You need to know what your values and beliefs are around money.
What is your risk profile? Does spending money give you pleasure? Have you got good saving habits? When you see something you really want, do you justify to yourself how much you deserve it even though you cant afford it. Do you like credit cards? Are you ever able to pay your credit cards off in full every month?
Do you bury you head in the sand when it comes to dealing with money?
There are lots of financial personality profiles assessments on the internet and many of them are free. Here is a link to a great article on personalities and money. How Your Personality Affects Your Finances
Go and find out what your relationship is like with money. Then decide if you have the commitment, desire and motivation to pursue these financial goals before you turn thirty.
2. Write Down Your Financial Goals.
“By failing to prepare you are planning to fail” Benjamin Franklin
Once you have an understanding of your financial personality, you can then start to plan your financial future.
Write down your financial goals – short, medium and long term goals.
The timeframes you set for these goals need to be aligned to your financial personality.
Use the KISS and SMART metrics to write your goals. (Keep It Simple Smart) and (Specific, Measurable, Action, Realistic, and Time Bound).
This financial goal needs you to be disciplined and focused. If you struggle with these personality traits – thats ok. Find someone who can help you or go on the internet and look for templates that you can use to guide you to writing your goals.
Find out how to write your financial goals that are aligned to you and your current priorities in life.
If you don’t take the time to put a financial plan in place by the time you reach your thirties, you increase your chances of failing to achieve those financial outcomes that will enable you to live your dream life.
3. Stop Impulse Spending
“Remember, buying something is not the problem
Give up your bad habits around spending. The sooner you give up the habit of impulse spending, the better off you will be financially.
Try to understand why this behaviour is important to you as it does not serve you well. This behaviour does not support wealth creation. If you continue to spend impulsively your financial future going into your thirties and beyond, will be a struggle.
Don’t stop enjoying your life and spending money all together. You should be spending money on things that make you feel good. Just be realistic about your spending habits. If your spending is reckless and impulsive, then do something about it.
4. Get an App To Track Your Expenses
“There are plenty of ways to get ahead. The first is so basic I’m almost embarrassed to say it: spend less than you earn” Paul Clitheroe
If you are in your twenties and you have a negative perception or no motivation to budget or track your expenses you need to change right now.
Holding on to these beliefs will hold you back from having any financial security in your thirties and later in life. Keeping a track of of your expenses is one of the key financial habits that will enable you to have financial wealth and independence in your life.
There are some amazing budgeting apps that you can download. Go search for these apps as they enable you to budget and monitor your expenses with ease and no stress.
When you reach thirty it is essential that you are able to live within your means otherwise you will find yourself drowning in debt.
Remember your thirties will bring more expense and cost to your life. Good budgeting habits will ensure you are prepared to manage these extra costs and live within your means.
5. Learn About Investing
“Formal education will make you a living; self-education will make you a fortune”. Jim Rohn
To create long term wealth you need to become educated about investment.
The best time to start getting the basics sorted around investment and start building your wealth is now – as you head into your thirties.
With sound investment planning in your twenties you should have an investment portfolio up and running by the time you are thirty.
Investing in your future now, before you turn thirty, ensures that you will reap the financial rewards of security and independence for the rest of your life.Advertising
6. Learn How To Manage Your Debt
“Debt is like any other trap, easy enough to get into, but hard enough to get out of.” Henry Wheeler Shaw
Don’t borrow money to buy depreciating assets is a key rule to managing debt.
Debt can work in your favour, but only when you use it for things that tend to rise in value over a reasonable period of time.
Using borrowed money to invest in a house, a business or an investment (which includes your education) is the sensible use of debt. However you still have to pay the debt of and if you don have a plan to manage your debt, then interest will compound and your debt will triple.
Borrowing to buy a new phone, pair of shoes, TV, or car is not a smart use of debt.
Get rid of your BAD DEBT – credit cards, higher purchase or car payments. Avoid credit card debt like the plague.
There is a very simple rule to follow when you spending, if you have to borrow money for it, then you simply can’t afford it – that includes using credit cards.
7. Get Insurance And Start Saving For Emergencies
“The habit of savings is itself and education; it fosters every virtue, teaches self denial, cultivates the sense of order, trains to forethought and so broadens the mind” T.T Mauger
In your twenties the concept of an “personal emergency” is never thought about because it just doesn’t happen in your twenties. If an emergency occurs usually your parents will sort it out.
However that it all changes in your thirties and things like Life Insurance, Income Protection Insurance and Mortgage Payments start to appear in your lives.
You need to protect your future. Setting up a fund and getting insurance for you to call on in an emergency is a great financial goal to have underway as you enter into your thirties.
8.Stop Relying On Your Parents For Money
“You cannot help people permanently by doing for them, what they could and should do for themselves.” Abraham Lincoln
If you are still relying on your parents to financially support you when you are thirty, you should be worried.
I get that you may have a student loan and in your twenties your parents were your ATM machine however this is a bad habit to maintain as you go into your thirties.Advertising
It is pretty much guaranteed that if you have bad debt and still rely on a monthly allowance from your parents then your chances of having financial independence and creating wealth in your life will not happen.
That is your reality.
9. Start A Retirement Account
There is no way you would have missed all the hype that has been promoted about how important it is to start saving for your retirement in your twenties.
The book Get A Financial Life by Beth Kobliner focuses on helping people in their twenties and thirties get their personal finances sorted. In her book Beth Kobliner outlines an example to show how the power of time on your investments works.
“Suppose you set aside $1,000 a year from age 25 to age 64 in a retirement account that earns 5% a year (historically, stocks return about 8%, but we’ll be conservative). That’s $39,000 total you invest. By the time you turn 65, you’ll have $126,840. If you don’t get started with saving until you’re 35, you’ll only have $69,760. Starting just ten years earlier would have doubled your total. Yes, doubled.”
When you are investing in your future with the goal to achieving financial freedom, then time is your biggest ally. Start saving and investing now before you reach thirty.
10. Develop A Financial Abundant Mindset
“When we do what we love to do; when we are generous and seek to help others; when we live within our means and save money; when we always seek a more specialized knowledge…we then have an abundant mindset, and are bound to realize financial abundance”.
How you handle your relationship with money in your twenties will influence how you live the rest of your life.
Starting to develop a mindset that supports financial abundance, will help you to prosper in the future both financially and personally.
A person who has a financially abundant mindset is one who has developed knowledge and skills to acquire financial wealth however balances that with philanthropy and generous giving.
Pursing these 10 financial goals before you reach thirty will guarantee you financial security and independence for the rest of your life.
You have the power and the choice as you head into your thirties to create the life you desire.
I hope you choose well.Advertising
‘Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery” Charles Dickens
Last Updated on September 2, 2020
How to Set Financial Goals and Actually Meet Them
Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?
In this article, we will explore ways to set financial goals and actually meet them with ease.
Table of Contents
4 Steps to Setting Financial Goals
Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.
1. Be Clear About the Objectives
Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.
It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.
Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.
2. Keep Goals Realistic
It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.
It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.
3. Account for Inflation
Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.
Therefore, account for inflation whenever you are putting a monetary value to a financial objective that is far into the future.
For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.
4. Short Term Vs Long Term
As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.
By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.
How to Achieve Your Financial Goals
Whenever we talk about chasing any financial goal, it is usually a two-step process:
- Ensuring healthy savings
- Making smart investments
You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.
Ensuring Healthy Savings
Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.
This is the focal point from where you start your journey of achieving financial goals.
1. Track Expenses
The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.
Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.
If you’re not sure where to start when tracking expenses, this article may be able to help.
2. Pay Yourself First
Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!
Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.
The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.
Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.
3. Make a Plan and Vow to Stick With It
Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized
Nowadays, several money management apps can help you do this automatically.
At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.
Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.
You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.
4. Make Savings a Habit and Not a Goal
In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.
Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:
- Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
- If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
- If you go shopping, always look out for coupons and see where can you get the best deal.
The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.
5. Talk About It
Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.
Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.
6. Maintain a Journal
For some people, writing helps a great deal in making sure that they achieve what they plan.
If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.
When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.
Making Smart Investments
Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.
1. Consult a Financial Advisor
Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.
Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.
2. Choose Your Investment Instrument Wisely
Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.
Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference.
As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.
3. Compounding Is the Eighth Wonder
Einstein once remarked about compounding:
“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”
Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.
Start saving early so that time is on your side to help you bear the fruits of compounding.
4. Measure, Measure, Measure
All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.
If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.
Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!
The Bottom Line
Managing your extra money to achieve your short and long-term financial goals
and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.
More Tips on Financial Goals
- 20 Better Money Habits to Help You Increase Your Savings
- The Best Ways to Save Money Even Impulsive Spenders Can Get Behind
- Top 10 Recommendations on Money Management Apps
Featured photo credit: Micheile Henderson via unsplash.com
|||^||The Balance: Inflation, How It’s Measured and Managed|
|||^||Money Instructor: Basic Types of Investments — Financial Instruments you should Know|