04 Jul 2022

Making Cents: Financial goals – What’s the cost?

Making Cents: Financial goals – What’s the cost?

Whatever our goal is, our commitment and follow through will vary depending on how important it is to us

IN this article, I’m going to tell you how ‘Goldilocks’ and ‘Buckets’ have a big say on whether you achieve your financial goals or not.
And we all have different goals and they’ll vary from person to person.
For some it’s becoming mortgage free as fast as possible, for others it’s paying off debt, or saving for a deposit on a house, or retiring at 55.
Whatever our goal is, our commitment and follow through will vary depending on how important it is to us, and how attainable reaching the goal is.
When people visualise what life would be like, or how happy they’d feel, if, their goal was achieved, they will do whatever they have to, to make it happen.
So, we can start out very motivated, with the best of intentions. We know how to set up the plan, but its only when we realize how much we have to give up, that we could run into trouble. The cost might be just too high and we abandon the goal altogether. It’s not that we don’t want it, it’s just we’re not willing to do the necessary.
But this I think is only true of goals that aren’t big enough or haven’t enough meaning to us.
Regardless of how big or small our goals are, we must consider the opportunity cost, right from the get-go. And the opportunity cost is saying yes to something like saving a certain amount each month or paying down debt within a certain time frame, which means you’re saying no, to spending that money on something else like clothes, holidays, nights out etc.
So, you have to run the numbers to see if it’s possible, because what you don’t want to happen, is think the goal is either too easy or too difficult and you end up in state of flux and fast forward another year, and you still haven’t done anything.

Create a Goldilocks Goal
You want to find what some call the Goldilocks Goal which is creating a goal that’s just right i.e. its neither too easy nor too hard
And without pointing out the obvious, but I will anyway, identifying whatever you’d like to achieve is your starting point. You then need to work backwards and figure out, if there’s enough money to make it happen.
So, whatever goal you’d like to achieve, whether that is a short-term goal i.e. something you want to achieve in the next 12 months or a medium-term goal, which is something you want to attain in the next 5 years, or something far off in the distance and is 10 years +, you need to run the math and see what needs to be done.
And someone may only have one goal and that’s to achieve a deposit on a house, or save enough to get married, so they focus all of their energies on achieving that and nothing else, and that’s fine by the way.
They don’t have a 1-year goal, they don’t have a 20 year one, they only have a 2-year goal.
Whereas someone else might have a 1 a 10 and a 25-year goal.
The number of goals you have doesn’t really matter, what matters is how much you need to accumulate and/or save each month to make them become a reality.
And once you know what you’re aiming towards, and how much it’s going to cost, you can then see if it fits into your time frame and more importantly, into your monthly cash flow and lifestyle.

Bucket Your Goals
You’ll know I’m a fan of buckets, and I don’t mean the collecting of rubbish kind. I mean having a separate account that you put money into because it has a specific purpose and you’re separating that money and purpose away from everything else.
I like it because it just makes things easier to manage and follow, simply because you have assigned a specific purpose to each account. And I use the term bucket to describe what is just an account.
You can categorise your buckets into what each goal is for, by putting a name on them.
And it might look something like this:

Bucket 1 (Short Term)
Purpose: Holiday
Funds Required: €3,000
Time Frame: 1 year
Monthly Saving Required: €250

Bucket 2 (Medium Term)
Purpose: Car Change
Funds Required: €8,000
Time Frame: 4 years
Monthly Saving Required : €167

Bucket 3 (Long Term)
Purpose: Kids Future Education
Funds Required: €27,000
Time Frame: 15 years
Monthly Saving Required: €150
The above is just an example but, in this instance, you can see the cumulative cost of these goals is €567 each month. Now you know exactly how much is required to fund each and all of them.
And if you know, you have the funds available each month without having to work out whether you do or not, then lucky you, proceed to the next step.

Review Your Spending Habits
But if you’re unsure, you need to review your spending habits, because you need to build those goals into your monthly spend. If you don’t shape your monthly spending to account for these newfound expenses as well as funding your existing living expenses, then it’s unlikely you’ll achieve the goals you set yourself.
When you know what you are spending your money on each month, you can make the necessary changes, because you can’t change what you can’t measure, right? Which is why becoming familiar with your spending habits is so important because it has a direct impact on achieving your financial goals.
After analysing your monthly outgoings and adding to them the cost of each goal you set yourself, it will help zoom in on those categories that you may have to cut back on or eliminate altogether, if you want to fund those goals of yours.

Make Your System Automatic
Second last thing you have to do is get a system in place that makes sure you follow through, and it’s really very simple.
You know the amounts, you know the purpose, now set up that dedicated account/bucket and set up a standing order and lodge the specific amount you know you need into it each month.
Ideally, you have that standing order set up on the day you get paid, so that when your salary lands, and if we use the example I just outlined, you’ll see three standing orders leave, one for €250, another for €150 and the last being €167, each of them going into their own account.

Review Progress
And finally, another factor in achieving those financial goals you set yourself is measuring how you’re doing.
Check in now and then (every 6 months) to see how you are getting on. And this is more for motivation than anything else because it’s good to see you’re making progress, but you’ll know anyway what’s in your account, without even looking, if you have set yourself up correctly from the outset.
So, next time you’re putting your goals together, make them big and meaningful and then work out what the opportunity costs to achieving them are, and if you’re happy with what you need to do, then great, set up that dedicated account and begin saving into it right away.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at or

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