15th April 2019 at 9:49am
By Elle Tucker
How can we keep our promises about improving our financial habits?
Remember how on 1 January you promised to take your lunch to work, and calculated how much you’d save by the end of the year?
Perhaps you promised yourself you’d cancel that gym membership in favour of taking up running in the park. Or maybe you started 2019 with plans to shop around for the best deals on energy, but didn’t quite get around to it.
If this sounds familiar – don’t worry, you’re not alone.
You need a savings challenge
These are just resolutions – while making changes, if they’re to be successful, need to be more goal-focused and more like a ‘savings challenge’.
A recent US study revealed that vividly describing your goals in written form is strongly associated with success, and people who do this are anywhere from 1.2 to 1.4 times more likely to successfully accomplish their goals*.
This applies to all sorts of challenges – financial ones included.
Supercharge your saving
Kate Taylor, life design and empowerment coach says, “Creating definitive financial goals is like supercharging your way towards achieving them in a timely, consistent and empowered way. As this research shows, you are more likely to achieve your goals if you get clear about what you wish to achieve, get specific about it and write these goals down.
“This not only encourages you to get clear on what it is that you are setting out for your future, but also helps you to get motivated about why you are doing it, which empowers your actions,” she continues.
The smart way to take control
Kate says that regardless of what your financial goals are, and what you want to achieve, you can start with the simple SMART acronym to kick off your own savings challenge by setting empowered financial goals:
- Specific, simple, significant: what are your specific financial goals? Write down numbers and what you will be using your money for. Paint a picture of how this will positively impact your life.
- Measurable, meaningful and motivating: be clear on how you will know when you’ve achieved your successful financial outcomes. You need to feel empowered about the prospect of achieving your financial goals.
- Achievable and attainable: we would all love to win the lottery, but we know the odds are stacked, so get clear on what an achievable and attainable financial goal is for you. It may be that you will be saving 10% of your income on a monthly basis.
- Relevant, realistic and results-based: what is it that you are looking to be, do or have as a result of achieving your financial goals? How will you know when you’ve got them? Will that mean you are sunning yourself on a trip of a lifetime, or cutting the cake on your dream wedding day?
- Time-based: Put dates around when you would like to have achieved your financial goals.
Why not apply this to your own savings challenges?
You’re saving for now
If you don’t have enough money to buy a specific item, like a piece of furniture, challenging yourself to save for a quality item that you will love – and that will last – can make all the difference.
Tara Button, founder of the website Buy Me Once, the go-to place for finding the most durable products available, explains that “sometimes it’s hard to make quality buying decisions because we are put off by a higher price upfront. We’re now so used to spending our money on cheaper goods which “will do for now” and the idea of saving up for something has faded from the mainstream.
“However, there are big savings in money, time and stress to be made if we’re willing to invest in quality.”
This kind of approach frees you up to set aside some money in a savings account, or a Cash ISA. You get a bit of interest on your money, but it’s not locked in.
And if you save by direct debit, you’ll hardly miss it.
Saving for the medium term
Set yourself a goal of putting a small amount aside regularly to save for things like a wedding, car or house deposit.
ISAs are a popular way to save like this because you have the potential to grow your money tax efficiently if you choose a Stock and Shares ISA (S&S) – but you can still get your hands on it when you need to. If you’re considering a S&S ISA, a timeframe of around at least five years gives the potential for growth while managing the market ups and downs of investing.
You can read about ISAs, in our article What’s an ISA, who are they for and when should I consider one?
Saving for the future – that’s meaningful and motivating
Setting a savings challenge is harder when the goal seems a long way off. But by following Kate’s advice and putting a clear time scale on it, it can be just as achievable as a short-term challenge.
Getting to know your pension is a clever way to get on top of this particular challenge, and watching its progress year by year, could tick all those SMART boxes.
First of all, work out how much you might need to live comfortably in retirement. If you’re not sure how much you’ll have when you stop working, you can find out how your savings are shaping up using our simple pension calculator.
You get tax relief on what you save into a pension and if you’re in a workplace scheme you pay in and so does your employer – so make the most of it.
… and looking further ahead
And although saving money into your own pension pot is a vital part of preparing for the future, it also makes sense to find out more about your State Pension entitlement too.
Our State Pension explainer The State Pension – what do I need to know? highlights what you need to know about it – and when you’re likely to be able to get it.
If you started 2019 with financial resolutions which haven’t lasted – why not change them to clear goals that can help you take control of your money?
Elle Tucker is a freelance journalist writing on behalf of Standard Life
Please remember that the value of your investments can go down as well as up and may be worth less than you paid in.
The information here is based on our understanding in April 2019 and should not be regarded as financial advice.
Standard Life accepts no responsibility for the information contained in the websites referred to in this article. These are provided for general information only.
* The Gender Gap and Goal-Setting: A Research Study, Leadership IQ