2022 isn’t just the start of a new year, it’s the start of a new decade. This is the perfect opportunity to pause and reflect on our lives and start setting goals to better ourselves. A great way to start is by setting solid personal goals that will help you achieve financial success in the long run. Here are five realistic personal financial goals to complete by age 30; in order to make your next life stage less stressful.
1. Devise long-term financial goals
It is tried and proven that goal-setting is the first step to achieving success in any area of life – and that includes your finances. It’s crucial to set long-term goals to enable you to look at the big picture.
In order to achieve financial success in your life, you must first define what success means to you. These financial objectives may take many years for you to achieve and it’s important to keep them in mind as you map out your yearly financial goals. Examples of these could be saving up for retirement, saving up to send your children to university, or even saving up to purchase a new house or car. It is easy to get distracted from these objectives by more urgent payments and it’s not always easy to set aside money for these goals when you’re cash-strapped. But the key to achieving them is to keep the big picture in mind as you budget for your different expenses, so that you never lose track of them.
For starters, you may begin to break down your big goals in the long-term into smaller short-term goals. It is easier to envision and achieve monthly or yearly goals than a 10-year mark and it will keep you motivated over a prolonged period of time. People naturally crave instant gratification and you’ll be much more likely to keep on track towards your big goals when you feel the satisfaction of achieving your short-term goals.
2. Manage your debt
As you grow older, you may take on more debt in the form of car loans, wedding expenses, mortgage housing loans, or student loans etc. For many individuals in their 20s, housing loans begin to come into play. Another kind of debt that most people will have but few are aware of the dangers are credit card debts. Statistics illustrates that one out of five credit card holders only pays the minimum sum. People should avoid such practices and aim to always pay the relevant debt off in full, as credit card debts are tied to high interest rates.
Exercise the management of any debts wisely and always have the financial goal of “staying debt free” in mind and pay off any debts as soon as possible.
3. Start savings for retirement
Your current standard of living is a good gauge to what you aspire in your retirement. It’s easy to say you will lower your lifestyle once you retire, in practice, but it may not be possible after being accustomed to such a lifestyle. It may be even harder if you aspire to enjoy some luxuries in your retirement.
Subsequently, consider how much you earn and how much you are able to save every month towards your retirement. Put as much as you can towards your retirement savings. Also, while you’re at it, figure out if you can cut any unnecessary monthly expenses after jotting it down. Anything that you think you can live without in retirement, you should try to live without today.
Anything you save and invest today will feel like you’re taking away from your current self. But the good news is that it will be helpful to your future self. Planning for retirement wisely will help you grow your retirement nest egg.
When building your retirement nest egg, you should look at it as adding layers of safety nets for your retirement.
The first safety net, and also the one every Singaporean and PR has, is your CPF. You contribute close to 37% of your wages to it through your working years, in a bid to afford the basic retirement level.
Next, the home you live in is an asset that you can tap on to unlock cash in your retirement. The easiest ways to do this is by a) renting out spare rooms once your children purchase their own homes for their families; b) sell back part of your HDB housing lease to encash unrequired lease; or c) downgrade to a smaller home.
While being employed, you would also have spare cash left over at the end of the month. You can use it to inflate your lifestyle, buy gadgets, luxury products and go on holidays; or you can simply utilise it to save and invest for your future.
4. Learn how to invest
Investing may seem daunting, especially if you’re not financially-savvy and do not know where to begin. However, with rising inflation and salaries that often don’t increase proportionately, your spending power actually decreases over the years if you’re not investing and growing your money! Investing isn’t reserved for a special group of people that follow the stock market every day, as there are many other types of investments that may be more beginner-friendly to start off with.
One option for starting your investment journey is with investment-linked insurance plans (ILPs), which typically contain both insurance and investment portions. A portion of your premiums for these plans go towards investment in sub-funds, which are managed by fund managers. The plans enable you to choose the form of investment that you would prefer; using either cash, Supplementary Retirement Scheme (SRS), Central Provident Fund (CPF) Ordinary Account (CPF-OA) or CPF Special Account (CPF-SA) monies.
5. Find a Trusted Financial Advisor/Investment Consultant
Selecting the right advisor is important for achieving your personal financial goals. Look for one who can provide you with more value beyond just proposing you which products to buy. A good financial advisor should be there to hold your hand through your financial planning journey, providing you financial solutions catered to your needs while explaining the mechanics of each product to ensure you understand what you are purchasing.
Time is definitely on your side. So don’t make the mistake of starting your personal finance planning only when you’re in your 30s later.
In conclusion, if you have a track record of being unable to stick to your plans, start with just one of these 5 suggested financial goals and slowly ease your way into it. Do not beat yourself up if you slip up and overspend your budget or miss your short-term goals. Resolutions are not meant to be perfectly achieved, but rather to help you have the right mindset.
What are some of the personal financial goals that you have set for yourself? Share with us in the comments section below!
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