The new year is a great time to make plans and to set goals for the coming 12 months.
However, as a nation, Brits are not the best at sticking to their goals. YouGov research has revealed that, of those who make resolutions, only a quarter kept all of them (26%) and around a quarter failed entirely (23%).
If you’d like to make 2023 the year you set and keep to some financial goals, read on for some tips that will help, and for three constructive ways that saving can be less of a chore.
Review your budget
If you want to set financial goals you can keep, the first step is to make sure you’re aware of your spending habits. This means you can create goals that align with your circumstances.
Your first financial goal might be as simple as reviewing and understanding your budget.
Whether you want to keep a spreadsheet, or you have a banking app that can monitor your spending for you, knowing what you spend and where can help you to identify where you might be able to generate extra cash to save.
From there, you can make positive decisions about areas where you’d like to spend less and how you’d like to redirect your money toward your new goals.
Set realistic goals
One reason many people fail to meet their goals is that they are simply too hard.
If you’ve been struggling to save £100 a month to your ISA, setting a goal to save £500 a month is likely to result in failure. You then get disheartened, give up, and potentially end up saving nothing at all.
When you come to set goals it’s important that they are realistic for your circumstances. So, if you have reviewed your budget and found you have £250 a month to save, set that as a target.
Getting into healthy financial habits is half the battle. Once you are in a routine it becomes much easier to then increase the amount you save later on. You’ll also benefit from the motivation of reaching the goals you set yourself.
Create an emergency fund so your goals aren’t derailed
An emergency fund is one of the cornerstones of good financial planning.
It’s a fund, held in an easy access account, that you can access if an unexpected bill arises, or you are out of work for a period. It might be a leaky roof, a car breakdown, or another out of the blue event.
Having a fund you can dip into means the rest of your goals aren’t derailed. For example, it means you don’t have to redirect your regular savings for a few months to pay the bill, meaning you don’t hit your savings target.
3 ways to make saving more exciting
Being motivated to achieve your goals can help you to reach them. So, rather than saving being a chore, here are three ways you can make the process more exciting, giving you the impetus you need to stick to your plans.
- Set yourself a challenge
One way you can make saving more enjoyable is by setting yourself a challenge. Here are three to consider:
- The £1 challenge – literally put aside a pound, every day. Make things easier by setting up a standing order from your current account into your savings.
- The 52-week challenge – at the end of week one, save £1. At the end of week two, save £2. If you do this for a year, you’ll have £1,378 by the end.
- The 1p challenge – on New Year’s Day, save 1p. The following day, save 2p. If you increase the amount you save by 1p every day, you’ll have £667.95 by the following 31 December.
Of course, depending on your budget, you may decide to amend these amounts – saving £5 a day, for example.
- Save a percentage of your monthly earnings
If you have reviewed your budget and understand how much you can save, this is a good method.
Here, you commit to saving a percentage of your monthly earnings – the specific percentage will depend on your circumstances. Set up a direct payment into your savings account so you don’t miss it.
- Focus on your future goals
Research by Hal Hershfield, associate professor of marketing, behavioural decision-making and psychology at the University of California, has found that those people who think more about their “future self” save more.
In the study, reported by the BBC, Hershfield showed participants in his study a simple graphic that presented pairs of circles representing the current self, and a future self (see below). The circles overlapped to varying degrees, and the participants had to identify which pair best described how similar and how connected they felt to a future self 10 years from now.
He then compared these responses to various measures of financial planning.
In one experiment, he presented the participants with various scenarios in which they could either receive a smaller reward soon or a larger reward later. Those people who felt a greater connection to the future were much more willing to delay their gratification and wait for the bigger sum.
Hershfield then looked at his participants’ real-life savings. Sure enough, he found that the more the participant felt connected to their future self, the more money they had already saved.
Thinking about what you would like to achieve in the future can focus your mind when it comes to saving. Saving for something, rather than just the purpose of “building up savings” can make you more motivated.
It’s why we always encourage clients to think about their goals when we devise a financial plan and consider what they want to achieve in the future. By putting a focus on specifics, it can encourage individuals to stick to the goals they have set.
Get in touch
If you’d like to set your financial goals for 2023, please get in touch. Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
