10 June 2019
When you are on a savings journey, you need to know your destination. You must ask yourself what you are saving for. Do you want financial independence in retirement? Are you saving up for a quality education for your children – or yourself? Are there other life goals that you want to achieve?
When you have a clear understanding of your goals, you can plan effectively. These objectives will also anchor and guide you as you go through life, encouraging you to stick to your savings plan.
Taking a long-term view means focusing on your financial goals – the final destination you are moving towards on your savings journey. By focusing on your objectives, rather than the obstacles that life puts in your path, you will be more likely to reach your goals in a timely manner.
Also, setting long-term savings goals encourages you to save for longer and you are therefore able to maximise your compound interest. This is the interest you earn on previously accumulated interest, which gives you a substantial boost when you are building wealth.
We all have good intentions when it comes to self-control, but it is not always easy to assert this in everyday life. Go easy on yourself and make the act of saving as frictionless as possible. Perhaps you could set up an automatic debit towards your savings plan every month. Pay yourself first, without even having to think about it, before you focus on other needs and wants.
Staying focused involves knowing where you are going and planning to get there, no matter what. I could draw an analogy between saving and taking a road trip. Before you set off, you choose your destination and work out your estimated time of arrival. You then prepare for your trip by checking your tyres, filling up with fuel and so forth. Once you are on the road, however, you may encounter events that interrupt your journey, such as unusually heavy traffic or a flat tyre. While you may not have planned for these incidents, you still know where you are going and when you want to get there. With your eye on these goals, you can figure out a way to manage obstacles effectively. If there’s traffic, for example, you could use your GPS to find an alternative route; and if you get a flat tyre, you could call for roadside assistance.
Similarly, when you are saving towards a goal, you may encounter impediments such as poor market performance or the loss of a job. If you stay focused on your financial goals instead of feeling discouraged, however, you can recalibrate your plans and stay on track. You could engage with a financial adviser to adjust your route around the obstacle and provide you with the tools you may need to manage your circumstances. With this approach, disruptions do not become dead ends.
As a Sanlam client, your savings are in the hands of an expert team that knows how to grow your money to meet your goals. We can also help you to set your goals effectively. If you want to create an education fund, for example, Sanlam’s goal-based savings approach can provide you with the guard rails you need to establish relevant objectives. Going forward, because assumptions do not always match reality, Sanlam provides a Goal Manager tool that your financial adviser can use to assess your actual savings activity in relation to your goals. If any gaps are identified, you can adjust your plan timeously.
No matter what you are saving for, whether it is a comfortable retirement, a sound education for your children, an emergency fund or another goal, it’s essential to set up regular appointments with your financial adviser. Ideally, these planning sessions should take place annually, so you can gauge how far you have come, how far you still need to go, whether you need to change your route and whether you need to add new products to your portfolio. Essentially, this helps you to make sure that you are on track to getting where you want to be, in good time.