Being clear on your financial goals is essential to making the most of your money.
Making decisions with a clear endpoint in mind can make it easier to achieve financial security and allow you to enjoy your life to the full, so we’ve put together this brief rundown to help you get closer to your goals today.
1. Specify what a ‘rainy day’ looks like
At the first glance, stating goals like putting money aside ‘for a rainy day’ or similar may sound sufficient, but this lack of precision is unlikely to serve as a good motivator to save.
For example, what does saving for this proverbial ‘rainy day’ actually mean?
Many financial advisers might say this means having savings to cover six months’ worth of outgoings in an instant access cash account – but what does this mean for you? Every household will have different responsibilities with different vulnerabilities. Identifying yours with precision will help you calculate what you need, and when you can move on to other financial considerations and investments.
2. Focus on your time horizon
Saving over a period of time involves foregoing the more immediate fulfilment of spending our money as it comes in. Certainty over the destination of our financial journey can help us overcome human nature and its tendency to demand rewards in the here and now.
However, not every financial journey is a smooth skate to retirement: if you have children, what education do you wish them to receive? How do you want to make sure your family are provided for, should the worst happen?
These are obviously significant moments in life, but it’s also worth considering if you want a new car, or a dream holiday, or to put some money aside for a home improvement. These are often on shorter timeframes, and so will require different financial strategies.
3. Be patient
In setting clear goals, we create incentives for ourselves. Rather than abstractions, our minds can focus on clear aims to strive toward. From short-term targets like saving for a house deposit or a new car, or longer-term intentions such as comfort in retirement, motivating ourselves is always easier when we have a clear purpose.
This is because saving over a period of time involves foregoing the more immediate fulfilment of spending our money as it comes in. A certainty over the destination of our financial journey can help us overcome human nature and its tendency to demand rewards in the here and now.
4. Know what you can and can’t control
Interest rates are likely to stay low for the foreseeable future, which means inflation can reduce your money’s purchasing power over time.
Even at relatively generous rates, savings accounts can pay less interest than will keep pace with the rate of inflation. Savings accounts that do not keep up with rising prices will lose value in ‘real’ terms over time.
This is a real vulnerability that proper planning can mitigate.
Even being aware of the options is a good start, especially given that recent research by Brewin Dolphin indicated that 41% of Britons were not concerned about inflation as there was “nothing they could do” to reduce its effect on their financial lives.
5. Don’t delay your decisions
Postponing decisions does not mean that they do not have to be made, and opportunities on offer earlier in your saving journey may not exist down the line.
Setting clear goals also builds confidence in saving. Decisions are made better and faster, guesswork is reduced, and changes in circumstances can be reacted to sensibly – all of which are preferable to just improvising.
6 Save little and often
Having set clear goals, getting started by saving little and often, and seeing your own progress towards your goals, can reinforce your motivation.
It’s easier to make small sacrifices than big ones, of course – so working out how much it is feasible to put aside and at what pace will help you along the way. Gradually watching those small amounts build up into more significant savings will further encourage you to save more.
Thinking about the practical side of this is important as well – for example, the direct debit facility under Brewin Portfolio Services allows you to put money aside regularly – making it easy and convenient to add to your savings pot.
 Brewin Dolphin Family Wealth Report, November 2018
The value of investments can fall and you may get back less than you invested.
Past performance is not a guide to future performance.
No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us. The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
The opinions expressed in this publication are not necessarily the views held throughout Brewin Dolphin Ltd