It's hard to believe that the new year began more than two months ago! With the start of a new year comes new goals and resolutions - some of which we will stick to, while others were doomed before they started. Are you succeeding with your resolutions this year? Did your resolutions include setting and sticking to financial goals?
As a Licensed Insolvency Trustee (LIT) and Chartered Insolvency and Restructuring Professional (CIRP), I speak to many Canadians who are looking to get back on track with their finances. One of the most important things they can do is set financial goals. Without goals, spending can be impulsive and unfocused as we tend to spend more frivolously without a particular goal in mind.
How do you go about setting financial goals? First things first, consider three types of goals:
Short-term goals should include emergency savings. We all need emergency savings for things like car repairs, sudden travel for a family emergency or short-term wage loss. A good rule of thumb is to have three months’ worth of household expenses saved for these types of expenses. Other types of short-term goals can include funds for gifts or savings for income tax that you know you will need to pay.
Medium-term goals could be funds for a vacation, a home repair or renovation or a vehicle.
Long-term goals could be a down payment to purchase a home, paying extra on your mortgage or long-term retirement savings.
In order to save for a particular goal, you need to know what that goal will cost. If you want to save three months’ worth of expenses, keep track of your household expenses for a month or two to get a good idea of how much that would be. Let’s say your expenses are $3,000 per month. That means a savings goal of $9,000. To reach this over a one-year period, you need to save $750 per month ($9,000/12). If that amount is not realistic, then perhaps the goal needs to be adjusted so it can be saved over a longer period of time. This formula should be used for all goals. Figure out the end cost amount and divide that by the time period you have to save to arrive at your target saving amount. You’re much more likely to save if you have an end result to work towards.
The other benefit of setting financial goals is your spending will be much more focused. If you have an important goal you want to save for, you will naturally curb your spending to ensure you have enough for the goal as it is top of mind.
If you are experiencing financial difficulties and are unable to save because you are struggling with monthly minimum payments, consider obtaining information from a Chartered Insolvency and Restructuring Professional about your options. Every situation is unique and requires a personal review to ensure you are given the best information possible. For a list of trusted professionals visit the CAIRP website or contact one of our ten office locations where our team of Licensed Insolvency Trustees and qualified insolvency counsellors are here to help you get on the path to financial freedom.
Licensed Insolvency Trustee
Greg Best enjoys working with clients to create solutions for their financial needs.
CPA, CA, CIRP
Licensed Insolvency Trustee
Chris Sinclair believes a practical approach is required to solve serious financial difficulties.
Cynthia’s goal is to ensure that every client feels respected and understood and to instill hope that they can get their life back by giving them the fresh start they deserve.