Why you need a goal to look after your money properly
Taking care of your finances is already difficult enough to do. But when you try to look after the pennies, save up, pay off debt, and plan for the future without a concrete goal in mind, you make it impossible for yourself.
Let us go through a quick example for you. Think about all those times you’ve had to move savings back into your normal account, after only putting them into your savings a few hours beforehand.
Why? Because you didn’t have a goal to work towards! You’re saving on impulse instead. And that makes your financial plans unsustainable and unrealistic.
All in all, you need to have a goal to look after your money properly. And if you’re not sure what we mean by that, let us explain.
It’s much easier to save
Like the example above, when you don’t have a goal for your savings, you won’t be able to save effectively. You’ll just be throwing money from pot to pot, hoping at some point your savings account will start outgrowing your bank balance.
But without a long term financial goal, you’re unlikely to ever see that happen. With a goal like this, it’s much easier to save. After all, you know what you’re saving for – which means you can do so without breaking the bank.
Less impulse, more slow and steady
And when you know what you’re saving for, you know how much you can save on a regular basis. Because you’ve got that target to reach for, you may or may not have put a time limit on the savings, and you’re slowly but surely putting a bit of money away for it.
In the financial world, small wins matter the most. And when you can prove to yourself that you can save, and you can stay saving, and you don’t need to move that money back, you’ll be far more motivated to work on your goal too.
You’ll regularly review your budget
Onto your budget. How often do you review it at the moment? It might have been a good few months, a year or so, or you may have never reviewed it at all.
You might not even have a budget to work from. This is pretty common amongst the younger generation at the moment, but anyone can fall into this trap. So, if you don’t have a budget sheet to help run your house, you’re going to need one first.
But once you’ve got one, you need to review it on a regular basis. And if you have a goal in mind, you’re going to find it much easier to both remember to check your budget AND factor in the way your life has changed since you made it.
You’ve got a goal you’re keen to meet, and that means living according to your means, as well as putting them down plain on paper.
How often should you review your budget?
It’s a good question! Because the answer is a bit different for everyone. Most people do so on a monthly basis, as it makes sure they have a good 30 days to let changes settle each time. And when the time comes to check the budget again, they’ve got a good ‘set of data’ to work from.
But you may need to check your budget a bit more frequently than this, if you have a variable wage or your expenses aren’t set in stone. Some people check every 2 weeks, some people check every week. It’s up to you, but make sure you review your budget around once a month at the least.
You’re more likely to remember your credit debt
Most people have a bit of credit debt to work through, as most people tend to have at least one credit card.
But with credit cards being unlinked to your bank account (in quite a few cases), it can be difficult to remember to check in on what your current debt is. And as time goes on, the fewer payments you make, the higher that interest is going to grow.
With a goal in mind, however, you’ll find it far easier to remember to check your credit debt. It’s an active thought in your mind, after all, and that makes all the difference to your long term financial wellness. Keep an eye, keep paying, and stay on top of that interest!
If you spot errors on your credit report
Even credit reports aren’t perfect. They can sometimes contain errors, such as still displaying a loan you’ve fully paid off.
And when this can drag down your credit score and make it harder to secure a mortgage, temporary credit, and even a new job, these errors aren’t just simple mistakes. They can genuinely impact your life in a harmful way.
But if you do spot errors on your credit report, you’re not helpless in dealing with them.
Long term financial planning needs a goal
If you want to plan for the future with all your money needs met along the way, you need to be working with a goal. You need to know what you’re reaching for and why. You need to have that idea in the back of your mind at all times.
Not only does it help you build healthy financial habits, but it keeps you on track with your plans no matter what else is going on in your life. That’s the key to saving or investing in the long term: knowing what you want from the financial world, and then progressing towards it in a slow and steady way.
So, the next time you get the urge to save a bit of extra cash, or put a bit more into your investment fund, think over the tips above.
