Are your financial goals for 2018 on track? Are they in good shape as 2019 draws ever nearer? How can you tell? Is there an app, software or set of accepted advice pieces and/or books that can tell you?
Here’s the problem we have with those things. They simply are of very little use much of the time. They almost always rely on some rather large assumptions about you, your family, your future and even on the future of the economy. And as there is no such thing as a reliable crystal ball – and our economy here in South Africa is certainly not stable or easily predictable, let alone your own life, then many of these ‘resources’ are practically useless.
So if we take that as a given, how can you tell if you’re on track for your financial goals?
One of the best ways to do that is looking to the recent past. Shift your focus to comparing the current state of your finances to what they were a month ago, three months ago, a year ago. Are your financial affairs in better shape than they were then?
Why does this methodology work? Simply because it removes all of those general – and usually inaccurate – assumptions and replaces them with the facts from your own life. You don’t have to worry about whether the creator of this financial rule/software/ app knows anything about the reality of your life or your specific challenges. When you use your own recent past as the point of comparison, that’s all included.
Are your financial goals for 2018 on track?
The Real Rules of Personal Financial Growth
If you were to press for the single most important number that can be used to evaluate your overall financial health, it is your net worth, and more importantly your net worth over time.
This is not a particularly hard figure to calculate. Your net worth is just the total of all your assets; savings, investments, the value of things like your house and your car minus your current debts. And to calculate your net worth over time you look at how much it has changed since whatever point in time you choose – a month, a quarter, a year, five years etc.
If you perform these simple calculations and find that your net worth is increasing every year, even by a small amount, then you can be fairly sure that you are heading in the right direction, whatever your specific financial goals are.
Are your financial goals for 2018 on track?
The more your net worth is increasing the better. It means that your assets are growing at a faster rate than your debts. But even if things aren’t increasing as quickly as you’d like, and those debts are not shrinking fast enough – say, in a year where you take out a mortgage to buy a home – you can still improve your net worth over the course of that year.
Your net worth figures can also be used to access the real progress of specific financial goals you have. For example, if your goal is to clear as much of your current debt as possible, then your focus is on making sure that your debt total goes down each year. If your goal is to build a healthy portfolio of retirement savings, your focus should be on making sure that the value of those things goes up every year. And if you need help figuring out how to do that, make an appointment with a financial advisor. They can sit down with you, and as they can listen to your personal story, help you make a plan that is the one most likely to work for your unique life and circumstances.
To put it all in a nutshell, so that you can get your 2018 financial goals on track and head into 2019 confidently; build your net worth. Save as much as you can for retirement. Stop worrying about magic formulas. Get help when you need it from a real, live qualified advisor, call us today and we will help you to make sense of your financial goals and keep them on track.
When Times are Tough, The Tough Make Money