Funny how fast 2019 passed by.
I really can’t believe a new year is just days away. I can still remember the time when I was taking down notes in my bullet journal of what my aspirations for 2019 are.
Now, we’ve come to that time of the year where we just simply reflect and get ready to set new goals.
I believe in goal setting. If you are a long-time reading of SavingsPinay, you know I always set goals every single year broken down into actionable month. Implementing goals that are specific, measurable, attainable, relevant and timely are important for me especially in the area of finances.
A lot of you will be doing your own financial review and I’m sure will be setting new goals to achieve in 2020.
So, in this post I am going to cover 10 smart financial goals that are all focused on financial wellness. Let’s begin.
10 Smart Financial Goals To Set This Year
1. Create (and Follow) a Budget Every Month
A budget is such an important tool for those who would want to skyrocket their finances. Budget allows you to allocate your money well, making every piso count and do its job.
There are different ways you can budget your money. You can use an old school pen and paper, an Excel Template or an app. Whichever method fits you best, do it.
In a nutshell, a budget works by first defining how much your income is. Then, you need to create a breakdown of your expenses including the amount needed for each. Remind yourself that you should never go over the income you defined. Once done, all you have to do is follow your budget.
You can also try the 50-20-30 Rule of Budgeting which I shared in detail in this link.
Make it part of your goal next year to create (and follow) a budget every month.
Read next: How To Budget for Beginners
2. Track Every Expense
Another financial goal that goes hand in hand with budgeting is to religiously track every expense that you make, no matter how small or big that is.
It actually took me years to realize how important this financial habit is to create wealth. Here are the top three benefits I’d like to you:
- It helps identify your spending habits. Where your money usually goes, is it vices? Is it food? Is it on important items?
- You are less likely to make impulsive purchases or spend beyond your budget. Because you have been keeping an eye on how much you spend on specific things, you can notice firsthand when you spend more than the amount you intended to spend.
- Helps you build a better budget next time. This is where a lot miss when it comes to budgeting – it is a constant trial and error. There is always a room for improvement every single time.
If you track your expenses and find that you are overspending on food/lunch at work from a budget of Php 100 a day, you 15 out 20 times spend Php 120, you can now adjust this on your next month’s budget.
You can either allocate more money on food and cut back on the “wants” category or you can set a goal of bringing lunch to work instead or finding food within the budget. This is something a budget alone cannot do because you don’t have a record of where your money goes.
Next year, be more disciplined in tracking your every day expenses. This could save you more money that you can ever think of.
3. Establish an Emergency Fund
An emergency fund is a money cushion available in case of emergency such as sudden death in the family, job loss, natural calamity and the like. Your emergency fund is your first line of defense in case something goes out of the way. How much should you have in your emergency fund? A good 3-6 months worth of your income or monthly expenses is the basic fund you need to save.
ALL OF US needs an emergency fund as all of us can encounter an unexpected bump in the road. But if you are looking for solid reasons then remember the following:
1. You are working toward a goal like owning a car, a home or starting a business
2. You or someone in your family have medical issues.
3. You are only relying on one income
4. You are trying to get out of debt
5. You are focused to be financially at peace
If you have yet to build your own emergency fund, this is the right time to do so. Here are 11 Ways You Can Build an Emergency Fund from Scratch.
4. Pay off any debt
I mentioned before and I say it again, Getting out of debt is one of the best financial moves you can do in your life. It promotes financial peace and security, more money to spend without guilt and improves your ability to save and invest.
There are five (5) doable actions you can do if you suffer from incurring debt.
Pay with cash
Stop using your credit card to pay for everything. If you really want to stop getting into more debt then you have to learn how to pay with cash. Paying with cash will give you consciousness with how much money is getting out of your cash flow.
Use bonus and extra money to pay debt
Before you build an emergency fund, before you make a budget, before you pursue any investments – you need to get rid of debt and reclaim your finances first. The fastest way you can do this is by using your bonus or extra money as payment. Now that the end of the year is near, we all are sure excited for the bonuses, 13 Month Pay and extra money coming.
Automatically put all your extra money to pay debt. I know this is the saddest thing ever considering all the hard work from the past year but at least you are off to a better start in the coming New Year.
Pay the most expensive debt first
This particular tip has been shared for a lot of times already and it definitely works. Once you have evaluated your debt you’ll surely know which has the highest to lowest interest rate.
A great strategy to get rid of debt is to pay the most expensive debt first. Focus on the debts that accumulate higher interest rate. The faster you get rid of the most expensive debt, the more money you can have to pay down the rest of your debt.
Pay the smallest debt first
This is the complete opposite of what I mentioned above. The Debt Snowball Method was first introduced by Sir Dave Ramsey. This technique suggests that you pay the smallest debt first.
Once the smallest debt is done, you will have to pay the next smallest debt until your debt is done at last. Because you are first paying for the smallest debt, you can easily feel the success and this will motivate you to stay focused on your goal.
Increase your income
Try to earn extra income on the side. You can read my post on 21 Side Hustles to Start this 2017 with Your Full-Time Job for some examples. Manage your spare time and use it to your advantage. Never settle with just one source of income because it isn’t and is never enough. The lifestyle we live today plus the debt that you owe can only be met and solved with extra money.
If there's any big accomplishment you need to focus this coming new year, it would be living the rest of the year debt-free.
5. Increase Financial Knowledge
Another good goal to set for the new year is to increase your financial knowledge. What does it mean?
Becoming financially literate is all about deep understanding of money and everything that goes in between. This includes budgeting, saving, paying down debt, retiring with confidence, investing and making money on the side.
This new year, make it a goal to be financially literate.
A financially literate person is someone who sets goals, plans his/her actions, budgets, saves, invests in stocks and accumulate more wealth than debt.
Someone who has no problematic credit card debt or mortgages.
Has savings or an emergency fund ready.
Maintains an investment portfolio for his or her retirement needs.
And does not live on one income alone.
Reading financial books or personal finance blogs are great sources of knowledge. You can also attend financial literacy seminars for free.
Below is a list of must read money books for beginners:
- The Total Money Makeover by Dave Ramsey
- Rich Dad, Poor Dad by Robert Kiyosaki
- Grow Rich While You Sleep by Ben Sweetland
- The Millionaire Next Door by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D.
- Your Money or Your Life by Vicki Robin and Joe Dominguez
- You are a Badass at Making Money by Jen Sincero
- Thinking Fast and Slow by Daniel Kahneman
- Secrets of the Millionaire Mind by T. Harv Eker
Here, on the other hand, are the financial blogs I highly recommend for you to read.
6. Cut Unnecessary Expenses
I am writing this goal also as a reminder for myself to cut spending where we can.
As I look back on how I spent my money in 2019, I know there are areas I totally missed showing discipline. I could have saved more money if only I became stricter and better in managing.
Cutting spending where you can is always a wise idea. Mr. Money Mustache, one of the best blogger I know said it best, “The most important thing to note is that cutting your spending rate is much more powerful than increasing your income.”
Two things that happen here:
1. You have more money to save each month; and
2. You permanently decreases the amount you’ll need every month for the rest of your life.
Look over your expenses this year and see where you can drastically cut off. It can be a subscription you never even used or too much dining out expenses. Vices such as alcohol, cigarettes and gambling are good examples too. Just choose a category you want to let go and save the amount it instead.
7. Start Your Own Sinking Fund/s
Have you heard of the term “sinking fund”?
A sinking fund is typically small amount you set aside every week, every month or every year into a specific goal that’s personal to you. People build a sinking fund to purchase furniture, luxury items, gifts, upgrades and such. This is also the same fund you build for dream vacations like a trip to El Nido, Palawan or your first trip abroad.
Sinking Funds are real game changer when it comes to making an effective budget. It allows you to prepare for weeks and even months ahead of time for expenses so that your budget won’t get ruined.
Not only is it effective but also easily modified to your current budget method. Just do the three step process:
Step 1. Think about what you want to save up for
Step 2. Know much you need and when you'll need it
Step 3. Include it in your budget categories
Again sinking funds are different from emergency fund and a regular savings account. You are doing sinking fund for variety of expected expenses that you want to slowly (but surely) save up for.
Here’s a personal example.
I know that by March 2020, my domain at www.izzaglinofull.com will expire. A .com renewal will cost me roughly Php 500 for a whole year. Since I know that I will need the money by month of March I can divide the amount into two, saving up Php 250 in January and another Php 250 in February. This way by March, I have prepared money to pay.
There are plenty more ways you can use sinking funds especially next year. Read more about this great money tip HERE.
8. Get more organized in your finances
Sometimes all we need is a little bit of organization to function better.
Have you ever lost a bill? Have you ever forgotten a due date? Do you constantly pay for late fees and other penalties? Still no record of your recent pay slip?
Missing bill payments because of lack of organization is a common problem that could be prevented after all.
Next year, make it part of your goal to be more organized in your finances. Aim to have a more focused view on your accounts, your bills and your day-to-day expenses.
Identify the dates you will pay your utility bills and automate them if possible. Keep a record of your net worth. You can also aim to have two savings accounts, one for discretionary expenses and one for your savings.
9. Get a side hustle
Hustling part-time changed my life for the better. It helped me accomplish the following:
- Boost my savings
- Increase my investments
- Have enough capital for a possible business venture or passion project
- Pay-off debt (credit card)
- Extra money for shopping, paying bills or vacation
Truly, I am thankful that God gave me a heart to serve using the talents He has blessed me with.
We all have gifts and expertise as human beings. Have you ever thought of your own gift? Of your own expertise?
A side hustle is any activity you do outside of your typical 9 to 5 job that helps you earn money.
It mostly involve something you are passionate about. It could be a talent of yours or something you are just born to be good for.
Side hustles offer freedom to decide how much time you will be working and when or what you will be working about.
There are plenty of side hustle ideas out there. You can start a blog, a podcast or a YouTube Channel. You can sell a product or service to others. You can buy and sell almost anything online whether through Facebook, Instagram or your own e-commerce website.
We are now in a season where a lot more opportunities are opening thanks to technology.
The question is, will you let technology rule your time and money?
Or are you ready to rule technology in exchange of financial freedom one day?
Here are more posts about side hustles you can read:
Review your hobbies and passions in life. Anything you are considered as an expert at? Hone your talent more so you can sell it as a service to others.
Lastly, I suggest adding “investment” in your goals next year. I was 19 years old when I did one of my biggest financial decisions – to invest in a mutual fund. Now after almost seven years, I have zero regrets.
I learned a lot about myself and my finances when I decided to take some risk and invest my money.
Why you should consider investing your money?
1. You are not getting younger. Common regret for older people when it comes to their finances is that they don’t invest as early as possible. Just like the popular Chinese proverb that says: “The best time to plant a tree was 20 years ago. The second best time is now.” You need to plan your retirement as early as now.
2. You have familial responsibilities. Whether you like or not you have familial responsibilities. You owe it to your family and your soon to be family to be financially prepared. Investing gives you a chance to make your money grow.
3. You have to make your money grow. If in any rare case you have money surplus then investing is a good way that you can spend your money intelligently.
Worried about the concept of investing?
Here are the things that could help ease the worry and fear of investing.
- Be Informed
- Have an Emergency Fund
- Study your Investment venture
- Learn from the Expert and Experienced
- Know that God wants you to be Financially-blessed
Final Notes from SavingsPinay
I hope this post helps you choose the best financial goals to set next year. New year brings so much hope for everyone, especially in the area of finances. My hope is you achieve everything you want to achieve this new year.
What's one goal you are ready to achieve this 2020?