At Remitly, we care about getting money home safely, and we care about helping you settle in your new country with some advice and resources. Financial freedom, for example, hardly ever happens by accident—it needs planning, determination and maybe a bit of assistance.
So here’s our guide to help you set financial goals, make smart and informed financial decisions, and ensure your financial security regardless of your circumstances.
Identifying your financial goals
Financial goals come in all shapes and sizes. Some are small or expected, like wanting to host a party or pursue higher education. Others can be large or caused by unpleasant surprises, like natural disasters that damage your property, sudden illness, or unemployment.
The first step to working toward your financial goals is to identify them. This will provide the bigger picture and help you plan how much—and for how long—you save, and how you spend your money.
Financial goals typically break down into three categories based on how much time you have to achieve them: short-term, mid-term, and long-term.
Short-term goals
The financial objectives you have for the immediate future that can be achieved in less than a year. Most people, without even thinking about it, have the short-term goal of covering their immediate living costs. This means covering things like rent, utilities, food, and transportation without taking out loans, paying for them with credit cards, or receiving financial help from family or friends.
Beyond this basic aim, other short-term goals could be paying off existing obligations like student loans, car payments, or credit card debts. Setting up an emergency fund by putting aside whatever you can spare in a savings account would help by keeping funds available for unexpected short-term expenses.
Mid-term goals
These are a bit further in the future, from one to five years out. They often represent significant expenses, like a wedding or a big vacation. Depending on your life circumstances, your mid-term financial goals might also include saving for your children’s education or starting your own business.
Long-term goals
Financial goals that are five years or more in the future could involve buying property, planning for retirement, or building a financial legacy. They require significant dedication and planning to achieve and are easier to reach if you’re more financially savvy.
Knowing how to project your income and expenses, and knowledge about growth-oriented investments, will be key in setting and achieving your long-term financial goals.
How to break down financial goals
Financial planning can be tricky. It’s easy to forget something and hard to foresee every potential risk. But it’s important to try to gain a complete view of your financial situation so you can at least create a financial plan that’s as foolproof as possible.
Here are some things to consider when you’re creating your financial goals:
Be S.M.A.R.T.
Although your financial goals might change, it’s important to develop some realistic short-, medium-, and long-term aims so you can start working towards the future you imagine for yourself.
As you set your goals, you can use the acronym “SMART” to help you create targets that are:
- Specific
- Measurable
- Achievable
- Realistic
- Timely.
For example, a vague short-term goal might be to save some money every week. A “SMART” short-term goal could be “Save £20 each week by bringing food from home to the office three days per week instead of eating out at lunchtime.”
By creating a very specific goal, you know exactly what you need to do to achieve it and you’re more likely to hold yourself accountable.
Gather financial information and assess risk
Financial freedom requires planning and an understanding of your own habits as well as the current financial market trends. Gather information about all of your expenses, incomes, and current debts, including contracts, insurance plans, utility bills, car payments, and other predictable expenses.
You could also start learning about different money management methods so you can understand the differences between saving and investing, and balancing risk and return.
Analyse your financial situation
Once you’ve got to grips with the fundamentals of finance, it’s a good time to conduct a financial audit on yourself. Meticulous analysis of your finances will help you understand what adjustments you need to make in your spending and saving habits.
Set a strict budget that aligns with the financial goals you’ve set for yourself and gives you the best chance of achieving your intended outcomes.
Develop a comprehensive financial and investment plan
Even if you only have a small amount of money left over at the end of each month, deciding what to do with it is paramount to achieving your financial goals. Should you use the money to pay off debt, save it, or invest it?
How you make this decision will involve an assessment of risk and of your priorities, as well as an understanding of how money works. The financial world is complicated, so consider finding a financial advisor who can help you achieve your goals—there’s more on that later. The clearer and more specific your financial and investment plan is, the easier it will be to implement on your own.
Putting your financial plan into action
With a holistic financial plan in place, you can start taking decisive actions towards your short-term, mid-term and long-term financial goals. One constant is that you should continue to monitor your money by tracking expenses, savings, and investments. This information will provide valuable and up-to-date insights on how it’s going.
To keep yourself motivated, review your finances regularly and have some short-term goals that can be reached easily. This will help you feel the benefits of your smart money-making decisions and help you feel positive about your long-term financial goals.
Monitor your progress and make adjustments
There are always unexpected developments that can require adjustments along the way. It could be unexpected expenses, changes in your circumstances, or fluctuations in the market. Always ask yourself if your actions are aligned with your financial goals. If they aren’t, or if you think you could tweak your approach, don’t be afraid to make changes along the way.
As you achieve short-term goals, consider adding a few more, or moving your mid-term goals into the short-term category, so there’s always a tangible next target.
Revise and update your financial plan over time
As time goes by, you’ll be gaining more insight into your financial habits and your overall financial health. Audit your finances at the end of every year, or whenever a significant change occurs. This will help ensure your financial plan is still relevant and effective and could also help you identify new financial objectives, goals, and opportunities.
As you look back on your finances over time, you’ll also start to notice how fluctuations in the market affect you personally, making you better equipped to make financial projections for the future.
When you create a financial plan for your future, a popular rule of thumb for budgeting is the 50/30/20 rule. This involves splitting your income to cover your expenses so 50% is assigned to needs, 30% is assigned to wants, and 20% is assigned to savings or investment.
If you can’t cover all of your essential needs with 50% of your income, you should consider making lifestyle adjustments to make your day-to-day life more affordable. Or you could consider taking on extra work, if you have the time and energy, to increase your income.
Tools and resources for financial planning
Planning your financial future might feel like a very complex task to approach alone. Financial advisors can help you if you don’t feel confident making these decisions for yourself, or you’re too busy to dedicate the time it takes to manage your finances in detail.
It may be that you’re at a point of change in your life, like divorce, selling a business, or approaching retirement. Specialist advice from trained professionals can really make a difference here.
There’s help to find a financial advisor out there, but another way is through word of mouth. Your friends, family, or colleagues might be able to provide a trustworthy suggestion. Some workplaces have financial advisors that they recommend, too.
Whether or not you decide to move forward with a financial advisor, there are plenty of tools and apps out there to help you take control of your financial situation. Here are a few:
- YNAB: best for creating a financial plan and budget.
- Honeydue: best for managing money as a couple.
- PocketGuard: best for curbing overspending.
And of course, Remitly is the best for sending money and receiving money securely. Good luck with your planning.
FAQs:
What are the top things to consider when setting financial goals?
You should think about your income and your short-, mid- and long-term plans, and try to spend and save accordingly. And if you’re able to, keep an emergency fund aside for unexpected expenses like a broken boiler or problems with the car.
What is the Rule of 72 in saving?
The Rule of 72 is a very old but still helpful formula used to calculate how long it will take for an investment to double in value, based on its rate of return. You can use the Rule of 72 to calculate the number of years it will take for an investment to double, or to calculate the expected rate of return or interest.
There’s more on this here from Barclays—who we think are one of the best banks for immigrants to the UK.
Where can I find a specialist financial advisor in the UK?
If you don’t have anybody to recommend a specialist to you, Citizens Advice is a good place to start—they can help you find advice on savings, investments, pensions, mortgage providers, and more. Check out the link in our guide above.
