December is likely to bring renewed impetus to many of us to sort out our financial priorities. Although it is a busy time of year, I’d like to encourage you to take some time off from the daily hustle and set some financial goals for yourself for 2020 right now.
Goals with an action plan
Many of us make New Year’s financial resolutions. Then by mid-January, our resolve begins to fade. One way to make sure these money missions are not mostly forgotten in a few weeks is to develop a concrete plan of action.
For example, last weekend, I made a list of my financial desires, both the short and long term. You may want to do the same and include goals such as saving for a down payment for your first house, paying off credit card debt, saving up for that dream holiday, helping out a loved one financially, retiring early, or whatever else you dream of accomplishing.
I am using this week to decide which of my goals are most important to me. Then I will figure out exactly how much money I’ll need to accomplish each goal, what my timeline is, and how much I need to save and possibly invest regularly to hit my target.
You may want to take a similar course of action. You may also benefit from discussing your own financial realities and expectations with a financial planner.
Investing for retirement
For most of our readers, saving and investing for retirement will likely be very important in 2020 too.
The full basic State Pension is currently £168.60 per week. Do you truly believe you can live on that amount for the rest of your life after retirement?
It is important to form a realistic view of how you can pay for retirement. For example, I’d encourage you to contribute to your workplace pension scheme.
Every UK resident should also learn more about the different types of ISAs available to them, with an emphasis on Stocks and Shares ISAs. There’s a wide range of investment options available for a Stocks and Shares ISA.
My Motley Fool colleagues regularly cover FTSE 100 and FTSE 250 shares. They point out that over the long run, the stock market returns about 6% to 8% annually on average.
Time is on your side
Let us assume that you’re now 35 years old with only £10,000 in savings and that you plan to retire at age 65.
You decide to invest that £10,000 in a fund now and make an additional £4,000 of contributions annually at the start of the year. You have 30 years to invest. The annual return is 7%, compounded once a year. At the end of 30 years, the total amount saved becomes £411,904.
Saving £4,000 a year would mean being able to put aside around £333 a month or about £11 a day. Might you just be wondering if you should skip that next impulse purchase in the New Year?
Making the right investment decisions in stock markets is not necessarily about constantly picking winning shares and funds, but rather having a long-term strategy.
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tezcang has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.