Making Cents with Liam Croke: Break down your financial resolutions to reach goals

Liam Croke

Reporter:

Liam Croke

Email:

liam@harmonics.ie

Making Cents with Liam Croke: Break down your financial resolutions to reach goals

Liam is going to outline the first six months of implementing financial goals and good habits this week

With the New Year firmly under way, I thought it would be helpful to map out the year ahead with some suggestions that may help improve your finances in 2020.

So, in this two-part feature, I’m going to give you a month-by-month guide with some ideas about what you should be doing in the year ahead. And please feel free to tackle them in any order that works best for you.

January

This is the month when people make resolutions and goals about what they would like to achieve in the year ahead. However, the mistake they make and the reason why their goals don’t materialise I believe, are because of two things (a) they are too vague with what they want and (b) there is a lack of awareness of what their starting point is.

And on that last point, my advice is not to rush into making resolutions without first giving them some thought. Your starting point therefore is to look at what you did in 2019.

You’ve got to know what you’re up against and identify the mistakes you made in 2019 before you can make the necessary adjustments to ensure you hit those goals in the year ahead.

You need to have the data about where your money is going, available. When you do, you can then make what changes are necessary and begin to intentionally redirect money away from areas you may be overspending on, to areas that are more meaningful to you.

February

This is the month, I think people should be setting their financial goals.

If for example you want to save more money next year, it’s not enough just to say you want that to happen, it’s much too vague.

You need to say something like this: On the December 12, 2020 I’m going to have €5,000 in my account.

You now have a specific amount set, within a clearly defined time frame that you can measure progress against.

If you set yourself a big goal like saving for a deposit on a house, I would recommend you break that goal down into a series of much smaller goals, which will help you reach that bigger goal. Setting yourself one goal of saving €30,000 can seem overwhelming but setting yourself 100 goals of saving €300 every month may not be.

March

This is the month, I’d like you to check in with your partner and have that chat about your finances.

Obviously, Valentines’ Day falls in February, and talking about money isn’t very romantic so I would recommend you stay loved up in February and set aside some time in March instead.

You need to tell your partner about how you feel about their saving and spending habits. Are they spending too much? Too little? Share with them in a non-judgemental way what you’re feeling, what worries you, what you think they should be doing etc.

Do you know what your partner’s financial goals are? Do you know what yours are? Have you ever told them? If you haven’t, now is the time to have that chat.

April

There is never a bad time to create and follow a monthly budget. If you do, it will be one of the best things you do in 2020.

If you want to make progress and get your finances under control, a budget could be the key to achieving both. I meet people all the time who make a lot of money but they’re struggling every month. It’s not the amount they earn that’s the problem, it’s how the manage it.

But when they commit to starting a budget and more importantly, commit to sticking to one, things begin to change and make much more sense in a short period of time, and they can see what the problem was and what they need to do.

There are many different tools available to create your spending plan e.g. write it down, use an excel spreadsheet or use an online tool. I personally like using an excel doc. It’s easy to record, easy to follow and easy to see which areas you are doing well in and which you need to pay more attention to.

May

Make this the month you commit to (a) stop adding to your existing debt and (b) start destroying what debt you already have.

Debt is the biggest enemy to wealth creation. It impacts your monthly cash flow and takes away funds that could be applied to other areas of your finances, so the quicker you are debt-free the better.

The big advantage to getting out of debt is not the interest saving - yes that’s an excellent consequence - but for me it’s being able to use that money you’d otherwise be making towards loan repayments, and applying it to other areas of your finances like investments, savings, overpayments on a mortgage, children’s education, your pension fund etc.

June

This month I want you to do two things: (1) look at your savings rate and see if it can be increased and (2) assess your emergency fund.

Ideally, you should be saving at least 10% of your income which is separate to whatever you’re contributing to your pension each month.

If you’re struggling to save anything at all, rather than focusing on 10%, focus on 1% or 2% and gradually increase your savings rate over time. To help identify how much you can save and where it will come from, record what you spend your money on over a 60 or 90-day period and that will give you a good idea of those areas you could reduce your expenditure in.

In relation to your emergency fund, now is the time to check in and see if the amount you have saved is adequate. Unexpected expenses occur all the time and you need to be prepared for them regardless of what age you are or what income you earn.

Holding somewhere between three and six months of your net monthly income is a good number to aim for. Next week, I will continue with months July to December.