7 Steps For Planning Your Financial Future
When you picture your life in five or ten years, what do you see? Do you hope to own a house, a boat, or a motorcycle? Do you want to take luxurious holidays and go on refreshing getaways? Whatever your dreams are, you can begin to make them a reality by planning your financial future today. It’s never too late to start and your future self will thank you for the hard work you put in today! To help get you going, we’ve listed out 7 easy steps to achieve the exact lifestyle you want.
Overview
- Start with your financial goals
- Set a deadline
- Determine the savings goals
- Track your income and spending
- How will you achieve your goals
- Stick to the plan
- Celebrate Success
Step 1: Start with your financial goals
Dreaming big and envisioning your future is important. It’s easier for the human mind to follow through on actions if we start with smaller goals that are more manageable.
To do this, think about the immediate financial goals you want to achieve. Here are some ideas to get you started:
- Go on a dream holiday to a certain location
- Buy a vehicle
- Pay off a student loan
- Save $1,000 in an emergency fund
- Contribute to a retirement account
- Remodel your kitchen
- Anything else that makes you excited for the future
Be sure to keep your goals tangible and specific. It’s easier to achieve a goal that is well-defined. While we have given you a broad list of ideas, make sure to be specific and figure out how much money you want to put towards each of your goals.
Step 2: Set a deadline
Once you have your goals set, it’s time to figure out the deadline for each of your goals. Is the deadline: 6 months, a year, 5 years or 20 years? The deadlines you choose for each goal will set how much money you need to save every month to reach that goal.
Deadlines are used for fixed goals as a way to stick to a budget set to achieve your goals within a specific amount of time. If your goal is a more flexible goal and can be accomplished at any time then you don’t necessarily need a fixed deadline.
Here is an example of each type of goal:
Fixed goal: Save up for my wedding that is in 12 months.
Flexible goal: To feel financially secure in the future
Step 3: Determine your savings goals
Now that you’ve set your financial goals and deadlines, it’s time to figure out how much you need to save each month to reach them. Start by calculating the total amount required for each goal and break it down into manageable monthly contributions.
Fixed savings calculation (for goals with a deadline)
Use this simple formula to determine your monthly savings target:
Total savings goal ÷ number of months = monthly savings needed
Example: If you want to save $1,000 for retirement within a year:
$1,000 ÷ 12 months = $83.34 per month
Flexible savings calculation (for goals without a deadline)
If your goal doesn’t have a strict timeline, you can set aside whatever amount you can afford and let your savings grow over time. Use the following formulas to estimate your long-term savings potential:
- Weekly savings: Savings per payday × 52 weeks = Annual savings
- Fortnightly savings: Savings per payday × 26 fortnights = Annual savings
- Monthly savings: Savings per payday × 12 months = Annual savings
Example: If you save $100 per week for a vacation:
- $100 × 52 weeks = $5,200 per year
- $100 × 26 fortnights = $2,600 per year
- $100 × 12 months = $1,200 per year
By understanding how much you need to save and setting up a structured plan, you can steadily work toward your financial goals with confidence.
Step 4: Track your income and spending
In order to achieve your goals and savings per month needed, you have to know where you currently stand from a financial perspective. The first step to planning your financial future is to figure out where you are.
If you don’t already have a personal budget, consider putting one in place. Check out our blogs sharing different money management apps and how they can work for you. With a personal budget, you can see how much you’re spending and how much you’re saving—on a month-to-month basis.
Once you have two or three months of financial information at your fingertips (by using a personal budget), you’ll know how much cash you need to put away to achieve your financial goals. Additionally, you’ll be able to see if each of your deadlines are achievable and if your deadlines need to be adjusted.
Step 5: How will you achieve your goals
Now that you know how much you need to save each month, the next step is figuring out how to reach that target. Generally, you have two main options: increase your income or cut expenses—or ideally, a combination of both.
Ways to earn extra income
If your current income isn’t enough to meet your savings goal, consider finding additional ways to make money:
- Pet or house sit for a neighbour or friend
- Dog walking
- Babysit on evenings or weekends
- Make cash online (see tips for beginnings trying to make money online)
- Sell the belongings you longer need or want
- Rent out a spare room
- Become an Uber driver
Ways to reduce expenses
- Cutting back on unnecessary spending can free up more money for savings:
- Use coupons and sales when buying groceries
- Forgo ‘luxury’ spends like manicures and pedicures
- Reduce the number of dinners you eat at a restaurant
- Pack your lunch everyday for work
- Lower the frequency of shopping for clothes and accessories
- Host social events at home vs going out
- Unsubscribe to magazine and other monthly subscriptions
- Forgo spending in any area that’s not necessary
Step 6: Stick to the plan
Creating a financial plan is just the first step—sticking to it is what truly leads to success. Consistency and discipline are key to achieving your savings goals. To stay on track, consider these strategies:
- Write your financial goal in a place where you’ll see it every day (i.e. on your fridge, on your bathroom mirror, at your computer desk)
- Check your personal budget at least once a week to make sure you’re staying in line with your plan
- Ensure the money you save each month is in a savings account that isn’t being used for other things
- Minimize spending in unnecessary, ‘fringe’ areas
- Consider a side job to make up any difference.
Step 7: Celebrate success
Small rewards help keep you motivated to continue achieving your financial goals.If you stick to your plan for two months, treat yourself by buying a new piece of clothing or going out to the movies. Be sure your reward doesn’t get in the way of achieving your goals.
Celebrate, but stay on track.
And when you achieve one of your big goals you set in Step 1, such as paying off a loan or saving for retirement, be sure to celebrate with a significant other or friend. You’ve worked hard, and it deserves some recognition!
Need a boost to reach your financial goals?
Want some extra cash to help start planning your financial future? Apply with Swoosh Finance and we’ll set you up with a personal loan today.
