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Event Takeaways: Financial Goal Setting

Updated: May 13, 2021

What do the experts say about why you need to set financial goals, have a strategy in place and how to get these started. Set out below are the key takeaways and notes from our session with Jessica Cutrera, Co-founder of The Capital Company and Jasmine Jalif, Wealth Manager at St James’s Place.

Can you share 1 key money habit you do regularly?

  • Pay yourself first! When you receive your income, put a portion aside (before you spend it) to pay for your future self first.

  • Start doing something – it doesn’t have to be perfect. Doing something is better than doing nothing.

Why is it important to have clearly defined financial goals and a strategy in place?

Having goals in life is critical to achieve what you want: across the short, medium and long term. Start by understanding where you are today and what you can afford to allocate to each goal. Nowadays, there is more volatility, ambiguity and complexity than ever and a strategy will allow you to cut through all of the noise so that you can achieve your goals and give you confidence so that when you read the news or somebody gives you a piece of information that could potentially influence your investor decision, you know how to handle it. In other words, whether there is, or is not, a recession on the horizon does not affect your strategy.

Important to remember that goals do not need to be set in stone and can be flexible to allow for when life happens. Set a regular cadence to review and check in to see if your goals are still relevant. For example, the goals you set in your 20’s/30’s usually change dramatically

What should we be considering when thinking through our short term goals?

  • Firstly, ensure you have your emergency funds saved up ( the amount varies yet typically around 3-6 months of your daily living expenses kept in cash in the bank for a rainy day).

  • Start investing early! - The earlier you start the easier it is to achieve your goals. Compound interest stems from reinvesting dividends, for example: if you make 10% 0n $1,000, $1,100 is reinvested and 10% on that the following year would make you $1,210 but you would need to make 21% during the first year to get the same result so compound interest is incredibly powerful. This is critical to having a successful investing experience.

  • Identifying what’s important to you in the short term (such as costs you will need to cover over the next 2-3 years) then consider the saving habits you need to help you achieve those goals.

  • Note: Cash has become more and more problematic, whilst saving accumulating cash should not be undervalued (such as for your emergency funds), the environment has changed – interest rates have dropped and you cannot make a return that beats inflation anymore by keeping money in the bank. This presents a different situation to 20 years ago, whereby keeping money in the bank actually puts you on the backfoot as you cannot beat inflation. This means you need to be invested to have any chance of beating inflation.

Tip: Set a calendar invite reminder to help you ensure you are reviewing your goals and dedicating time to your finances regularly.

When it comes to our medium to longer term goals, these can feel quite daunting so how do we start to break this down?

Goals: The most important consideration when mapping medium/longer term goals is how they align with your personal life and to make them tangible. It is easier to commit to your goals when you can see them and they are realistic.