While everyone’s circumstances are different, there is no doubt about the relief a financial safety net brings. Try to make financial choices that will not only help you stay afloat, but also ensure you have something set aside for when you need it most.
Recent times have brought about many changes for all of us. The uncertainty that was created by the onset of a pandemic, has meant that we have to think twice before spending money. One thing is for sure: when your finances are in order, you have less stress about money for a rainy day. Setting yourself up for success when it comes to saving money all comes down to knowing what you have to change, how to change it and to make that behaviour stick. The best way to start almost anything, is to set small goals. Saving is an important goal, but without clear and realistic goals to help you stay focused, it can be hard to keep it up – especially when life gets tough.
Where can you start?
A good place to start, may be to take a good look at your budget and the choices you make. Research by behavioural experts at Discovery Bank showed five main things affect our financial health the most – and it has nothing to do with the size of your income. These five things are: how well we manage debt, whether or not we save, have the right insurance, how we manage the payment term on property, and our retirement plans.
It can all sound very daunting – but it doesn’t have to be. Experts in changing behaviour agree it starts with having clear goals. Sometimes it’s not the short-term goals that discourage us, but the ones that extend long into the future, for example, retirement. Warren Ingram, executive director at Galileo Capital, agrees that long-term financial planning is naturally difficult: “If you’re 25 and you set a goal to retire at age 55, that is so far in the future the concept is almost academic.” In other words, it feels so far away that it’s simply “not realistic.”
Setting goals around specific behaviours
What’s important when you start out setting financial goals, is to make them realistic. Also, you have to understand your financial behaviour and set goals that are shaped around the five behaviours that build financial wellbeing over time. If you’re curious, the Vitality Money Calculator on the Discovery website is available to everyone. You’ll get a quick view of your financial wellbeing and it can kick-start your thoughts around savings and other goals of adequate insurance, retirement funds, and managing short-term and property debt.
Be SMART about your savings goals
The well-known SMART system for goal-setting, suggests that every goal should aim to be:
- Specific – say exactly what you want to do
- Measurable – to keep track of your progress
- Achievable – be realistic so that you can reach it
- Relevant – the goal has to matter or add value
- Time-bound – steps to reach the goal in a specific time frame
An example of a savings goal that is SMART would be: By 2025, I want to save R100 000 for a deposit on a property. Setting goals with practical ideas on how to save an extra R20 000 each year will make it easier.
These could be:
- Save money by changing your cellphone package
- Put away 80% of any bonuses you get
- Only go out for dinner twice a month
- Cycle to where you want to go
- Sign up for after-hours freelance work
If you are savings towards different goals, it might be a good idea to save separately for different goals by setting up a separate savings account for each of your goals. Discovery Bank clients get access to a range of free savings accounts and can add as many savings accounts to their banking profile as they need.
As humans we have to see some reward for hard work. And saving can be difficult when life happens. So when you are faced with any fork in the road, you will have to make a decision about whether or not you need to adjust your goals. In agreement with Vitality Money’s approach, Ingram says, “There will be factors that influence you. The bottom line is that you should always keep your eye on the long-term financial goal, and adjust your short-term steps to get there.”
To stay motivated it is important that you reward every accomplishment with something that you value, like a new book or a new experience. These rewards will keep you on track. That is why Vitality Money rewards are such an important aspect of Vitality Money. Vitality Money keeps you motivated by rewarding you for every savings or financial goal you reach with travel, food and lifestyle discounts. It also gives you the benefits of financial returns through Discovery Miles and better interest rates on your savings. Every choice that strengthen your current and future financial wellbeing comes with a reward.
There’s no doubt that with the right goals in place, it is possible to get going. Start with setting your SMART goals today and check out the Vitality Money Calculator for some inspiration.
The Vitality Money Calculator is for information only and does not constitute financial advice. Please consult your financial adviser before making any financial decisions
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Behavioural theory shows that we humans don’t always make the most rational choices that serve us well in future. In uncertain times, we may also take more risks or make hasty decisions. Stop, take a moment and look these five behaviours and how you rate.