Business

Set some fresh financial goals for the new year

 You are not on your own in not knowing where your money is going
You are not on your own in not knowing where your money is going You are not on your own in not knowing where your money is going

In the last 35 years of financial planning, there have been one or two scenarios where we have had to set financial plans for the customer.

Whether the customer is very wealthy, or without a penny at the end of the month, the strategy is broadly the same.

The steps are simple: Firstly, become aware of what you are spending out for. This has become more difficult of late with our ‘tap and go’ cards, but it is the most crucial aspect of financial planning.

You are not on your own – not knowing where your money is going. Using an excel sheet or a written book attaches you to the reality of where the money is actually going.

Then, begin to decide which of the expenditure is truly required. There are arguably no better words in financial planning than ‘take care of the pennies and the pounds take care of themselves”.

Do you ‘need’ the item you are buying. There is a real feeling of hope and of control when you squeeze each penny and start to see the bank account rise rather than fall. It’s discipline next. Stay with it.

They say it takes 21 days to make a habit. I believe that. With every lure to spend, there is a chance to push back and create a new habit and put you in control rather than the barrage of marketing, keen to have you empty your bank accounts.

Blocking leaks should be the priority. Make obvious smaller short-term goals as well as medium and longer terms.

I was 24 when I created my first financial plan, and while the longer-term goals where a bit of a dream, the short and medium terms goals were clear and achievable, and they were achieved.

The shorter-term goals gave me a vision and belief they were possible, and, when they were achieved, I had a plan that I knew I could repeat.

That three-month plan alone was the key to the success of every plan thereafter. I could see what I aimed for, how I planned it and executed it, that gave me belief, and it was then a case of repeating more of the same but over the longer periods.

Make the goals visual, real and meaningful. My first was to fly my parents and younger brother over to see me as I lived away. This was in the day that flying was a bit of a thing, ie not cheap.

I simply visualised them getting off that plane waving and having the two weeks of enjoyment with them: the laughter, glass of wine, hugs and card games.

Focus on an emergency fund first. I aimed to have six months’ outgoings in my bank account. This would give me my security and my control. My mind could be free, free to dream, create bigger goals, or make brave decisions.

One of our key emotional needs is security, which is described as a safe environment to develop fully. Another is autonomy. By giving yourself this key starting point you are then able to focus on bigger matters.

If you are worried about base line security, this will paralyse the mind and may have you stuck in a job you just don’t want to be in. I focused on not spending anything ‘extra’ until I had that amount of money set aside. There are sacrifices.

Was it cool to have a car that I bought from a company called ‘rent a wreck’ because they didn’t want it anymore? Was it cool that it had mushrooms growing in the footwell because of the leaks? No, but I didn’t need to impress, I had a girlfriend anyhow, and we had plans we believed in, so I didn’t have to be cool.

Once again, I took all the learning from that and used it for future plans. Release all those chains.

I don’t watch TV, yet I still witness the ‘black hole consumer twaddle’ they market to society that can easily distract. ‘Love’ Island, ‘Rich’ Kids of Beverley Hills, ‘Real’ Housewives of Beverley Hills! What on earth? It’s hard to see how anyone can stand a chance with that gravitational pull.

Consumerism has no boundaries, and in taming it, so you do it, and it doesn’t do you, you have that control.

If you have debt, borrow it from the cheapest place, as I said last week, as secured loans and mortgages have a significant saving over credit cards.

Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial question, get in touch by emailing info@wwfp.net or by calling Darren McKeever on 028 6863 2692