Personal Finance

Top 5 financial goals to pursue in the new year

As we start a brand-new year, it is a good time to reflect on our financial goals and priorities. Whether you’re looking to organize your finances or fine-tune your current approach, there are some common goals that most people should consider for 2023. While achieving some of these goals may seem daunting, they are easily achievable with proper planning and dedication. By focusing on these goals, you will be well on your way to financial success.

Here are the top five financial goals everyone should pursue in 2023. (And if you have already achieved them, good for you!)

1. Building an emergency fund

Building an emergency fund is a crucial step toward financial stability. An emergency fund is a savings account designated for unexpected expenses such as medical bills or loss of income. An emergency fund can help you avoid financial stress and provide peace of mind during difficult times. It’s crucial to have a plan in place to deal with unexpected expenses, so you don’t have to rely on credit cards or loans during these stressful situations.

To build an emergency fund, it’s important to set a savings goal and create a plan to reach it. In general, it is recommended that you save enough money in your emergency fund to cover 6 to 12 months of essential living expenses. This includes housing, food, transportation, and any necessary medical expenses. The exact number you should aim for will depend on your financial situation and the level of stability you are comfortable with. Some people may feel more at ease with a larger emergency fund, while others may be able to make do with a smaller one. Keep your financial needs and goals in mind when determining the appropriate amount.

It’s also a good idea to keep your emergency fund separate in a high-yield savings account that is easily accessible when you need it. Keep in mind that building an emergency fund takes time, so start saving as soon as possible. You may begin by setting aside a small amount each month and gradually increasing it as your budget allows. It’s also important to be disciplined and avoid using your emergency fund unless necessary. By regularly contributing to your emergency fund, you can build a strong financial cushion that will serve you well.

2. Tracking your expenses

By tracking where your money goes, you can identify areas where you can cut back or change your spending habits. Many tools are available online to assist you in tracking your expenses, such as personal finance apps or a simple spreadsheet. Alternatively, you can use a budgeting system like the envelope method. This is especially useful if you have trouble with overspending or impulse purchases.

Reviewing your expenses regularly will ensure that you are on track with your financial goals and making the most of your money. You may discover that you are spending more than you thought in certain areas or that you have room to cut back on others. With this information, you can make more informed financial decisions and work toward your financial goals.

3. Paying off high-interest debt

Paying off high-interest debts should be a top priority when setting any financial goals. Taking care of these debts can save a significant amount of money in the long run. Debt, such as credit card debt or personal loans with high interest rates, can be extremely costly, so it’s important to prioritize the repayment of this type of debt before focusing on other financial goals like investing.

There are a few strategies you can use to pay off high-interest debt. One option is to focus on paying off the debt with the highest interest rate first, as this will save you the most money in the long run. Alternatively, you can pay off the debt with the smallest balance first, which can help you build momentum and see progress more quickly. No matter which approach you choose, pay more than the minimum monthly payment to make a dent in your debt. If possible, you could also consider consolidating your debts into one loan with a lower interest rate or negotiating with your creditors for a lower rate. By paying off your high interest debt, you can improve your financial stability and work towards your other long-term financial goals.

4. Protecting your loved ones

Protecting your loved ones as a financial goal is crucial for anyone looking to provide for their family and ensure their financial well-being. One way to accomplish this is to safeguard your assets and financial well-being. This can include purchasing insurance and preparing an estate plan.

Insurance can help protect you against unforeseeable events like illness, injury, or property damage. Having adequate insurance coverage can help ensure that your loved ones are financially secure in the event of a disaster. Another important aspect of protecting your loved ones is estate planning. This entails devising a plan for distributing your assets after your passing. By planning ahead of time, you can ensure that your wishes are carried out and that your loved ones are financially cared for. While estate planning can be complicated, it’s important to have a plan in place to protect your assets and provide for your loved ones.

5. Saving and investing for retirement

Saving for retirement may appear to be a daunting task, particularly if you are young and just starting in your career. However, it is never too early to begin. With the power of compound interest, even small contributions to a retirement account can add up over time. To take advantage of this growth, it is critical to begin saving for retirement as soon as possible.

Consider your retirement objectives and how much money you’ll need to save to meet them. This will assist you in determining how much money you need to save each month. Wealth generation is a critical part of long-term financial security. One way to accomplish this is to build a diverse investment portfolio. Stocks, bonds, low-cost ETFs, and other assets are examples of this. In addition, building a diversified portfolio will spread risk better and increase returns over time. It is advisable to consult a professional to determine the best investment strategy for your specific financial objectives. They can assist you in determining your risk tolerance and developing a customised plan to meet your requirements.

The fifth perspective

Setting financial goals is a vital step toward financial security and independence. In this new year, make use of this opportunity to reflect on your financial situation and devise a plan to improve it. Whether you want to improve your overall financial situation or make minor changes to your current plan, several key goals can help you take control of your finances and secure your future. It is important to remember that reaching financial goals can be daunting, but they are achievable with proper planning, dedication, and tracking progress.

Wang Choon Leo, CFA

Choon Leo is a growth-focused investor with an interest in innovative platform businesses that can connect users and fix market inefficiencies. He believes that companies with the most competitive business models will compound in value over the long term. Choon Leo is a CFA charterholder.

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