Yes, those people who create their own financial blueprints – including budgets, big goals for the future, and spending plans/prioritising – are better off financially than those who do not. For proof, you can read the stories of a New Zealand blue-printer here and an American blue-printer (Mr Money Mustache) here.
I guess we like the words financial blueprint because it reminds us that we can be the architect of our own financial life. And we can!
Why Write Goals?
It pays to write goals down because it lets you re-visit them. Sharing your goals with loved ones or a coach also makes them more likely to happen. This is due to the power of our need to be consistent with what we said (the principle of consistency).
Brian Tracy often said in his books that millionaires take a long term view. They think of their wealth as a family estate, formed over more than one generation and something to pass down.
Most of us want each new generation (our kids) to prosper, yet we only have ourselves to form that plan – we cannot expect those younger than us to have more insight and wisdom. It’s no use wishing our parents provided more assets or that we spent less in our 20s. We have to start now and make a written plan that’s right for our family’s future.
So get started with your personal financial goal setting and budgeting! If you are a working long hours type, you probably have quite a bit of wasteful spending (it’s just what seems to happen; I’m not trying to point the finger).
Monthly budgeting, along with a tracking system (e.g. Pocketbook app), will enable you to meet your savings targets much easier. You can read my article on bill smoothing if you’re not aware of this amazingly simple change. You can use a debit card for the ease of transactions, but never a credit card or Afterpay type service.
Don’t get Derailed from your Goals
On reading many stories of credit card debt holders, I noticed not one of them ever had any savings put aside. That’s because they are always repaying debt from blowing out their monthly budget (which credit allows you to do). Many of them also have no idea how much they spend or what is the best use of their disposable income (income after fixed expenses).
Many times, our bigger goals also get put off because of small emergencies! That trip to the dentist for more fillings, that visit to a sick parent far away… these things happen; however, afterwards the bigger goals must be put back at the top of the priority list again.
In the good times, tuck away more automatically, e.g. 15% of your after-tax income. This will form your major investment fund (you can also put it into your Mortgage Offset account). Yes, I do mean on top of your superannuation savings.
Say you want to save for a) retirement and b) children’s education/other. You first need to work out what you have left to save (after fixed expenses) and then how long you want it saved for until it is needed.
How Big shall I set my Financial Targets?
Retirement calculators with guiding information will help you to judge the different levels for your age and stage. You can often use the calculator’s guidance on ‘comfortable lifestyle’ or ‘basic lifestyle’ for retirement. See MoneySmart Retirement planner.
For education savings, you’ll need to figure out how much extra money the child might need on hand to supplement them until they get their own job. (It’s not about fees; it’s more about petrol/bus fares, textbooks and rent). For this, use ASIC’s Savings Calculator and an interest rate of about 4%.
In case you’re thinking, “Do you have rocks in your head; I only get 1%?”, you can receive 3.5% interest for up to $5,000 (extra 1% if over) for a child/teen in a youth e-saver at CUA currently. You could also (with more risk) get about that from ETF distributions, using one of the new low-brokerage investing apps.
It’s best to reach for attainable goals. It’s even psychologically better:
“… if our goal is to live well, we should see this goal as attainable—i.e., we should see the metaphorical “hole” in the putting green of life as a big one” – Psychology Today blog.http://www.psychologytoday.com/blog/the-good-life/201205/big-goals-matter
Jennifer Lancaster’s new book, Creative Ways with Money comes out on 27 January 2020 (eBook) and 7 February (paperback). So, educate yourself on protecting your money while creating more investing or business income… or income from a book, if that’s your thing.