20 Aug Reflect on your money goals this Women’s Month
2020 has turned life on its head and left the world feeling out of sorts; uncertainty and a lack of control over the outcome is often the most worrying. What better way to review the year and your future this Women’s Month than by tackling your finances and focusing on your money goals. Your money touches every aspect of your life. Therefore, it is so important to spend the time to ensure your money is working for you. Getting your finances in order and keeping it that way is the path to financial success.
Using tools to reach your money goals
I have found various coaching tools helpful when it comes to reviewing my personal finances. Specifically, using the ‘Wheel of Life’ tool and applying that to your financial life. It quickly identifies areas of imbalance, adds perspective and helps you to create goals and set priorities to ensure your money works for you in the best way possible.
Using this tool, you could have numerous segments to review. I find the following 5 to be the key aspects of my financial life: savings, debt, budgeting, health and insurance, and investments.
Complete the wheel:
- Start with a blank circle segmented into the areas you wish to review.
- Take some time and rate each segment of your financial life on a scale of 1 (very dissatisfied) to 10 (fully satisfied). Ask yourself how satisfied you are with each aspect.
- Go through each segment again and select a rating on how you would like this segment to be, ask yourself what it would look like if this was a 10.
- Decide on the actions you are going to take and set realistic, specific goals.
Suggestions for consideration when reviewing each segment of your wheel:
How much are you putting aside each month for retirement? Do you have sufficient cash reserves for the proverbial rainy day? You should have approximately 6 months of your monthly spend saved up in cash for emergencies. Does your bank offer a fair interest rate on your money market/savings account?
Make a list of all your debt with the amount outstanding, monthly repayments and the interest rate charged. Rank the list from the highest to lowest interest charges. Review the list and see if you can consolidate any of your debt specifically the higher interest rate debt into the lower interest rate debt. Set goals to repay the most expensive debt first. Don’t assume your bank will offer the best rate on mortgage bonds just because you have an account with them.
Do you know how much you spend each month? Download three months’ worth of bank statements from your online banking into Excel. Categorise each amount spent into groceries, rent, debt repayments, savings, water and electricity, medical, education, entertainment, etc. Exclude any once-off large expenses and divide each category by 3 to get an average monthly spend. Compare how much you are spending on debt repayments versus savings. Review each category and whether you are happy with how much you are spending. Set goals to reduce a specific spend category and review every 3 months to monitor your progress.
Health and insurance
Are you sufficiently covered for medical costs? Do you have sufficient life and disability cover? How much are you spending of your total income on health and insurance?
Are you on track for retirement? How much have you accumulated so far? Do you have a healthy balance between discretionary and retirement investments. Are your investments well diversified across different asset classes, asset managers and geographic locations? Do you have appropriate local and offshore exposure?
You may need to seek professional advice to assist you with the above. This could be a money goal you set – to contact a wealth manager. They can assist you to complete a financial plan and help you make sure you remain on track.
Review your financial Wheel of Life regularly
Regularly reviewing your financial Wheel of Life is a key part of reaching your money goals as it keeps you accountable to your action steps. Getting on top of your financial life will give you an amazing sense of achievement and security.
I encourage you, as a valuable gift to yourself for Women’s Month, to take the time to review your finances and move one step closer to financial independence.
Lindsay Frost CA(SA) CFP® is a wealth manager at Netto Invest.