It’s something we’ve all done before… set New Year’s resolutions that only last a few days. Or, if you’re particularly dedicated, until January 15.
Although we set goals with good intentions of following them through, more often than not they fall by the wayside and we end up back where we started.
That’s why I’ve found February can be a better month for goal setting. For most of us, the silly season has settled down, and life has returned to normal. We’re more likely to be back at work or study, and settled into our regular routines.
February can be a great time to map your financial goals for the year(s) ahead. Some good specific examples could be to:
- Save and invest 10% of your salary this year;
- Increase your superannuation contributions by 5% a year for the next 3 years; or
- Pay off your credit card debt within six months.
Financial goal setting
If you’re looking to set financial goals this year, some simple questions to ask yourself are “where am I now?” and “where do I want to be in 6-12 months (short-term), 3-5 years (medium term) and 5-10 years (long term)?”
Understanding your financial habits is equally important. Acknowledging the good financial habits you’ve already set (and sticking with them), writing down those you need to work on, and how you plan to do it. If you’re looking for a good book to read about the benefits of setting small incremental habits, check out Atomic Habits.
The book dives into 4 laws of setting good habits (and breaking bad ones). I find most good money habits are about making them easy so you can take advantage of the enormous value of compounding without even thinking.
Investing goals for 2020
Here are three possible investing goals for 2020 that will help you get into good financial habits and make it easy to boost your savings in the years to come:
Power-up with top-ups
Regularly adding to your portfolio is a simple yet powerful investing goal and will help you boost your wealth accumulation over the long term.
The chart below shows the benefit of topping a $20,000 investment portfolio with $50 per week over 20 years, earning a return of 9% per year after fees, compared to not topping-up over the same period.
By topping up, the portfolio grows to over $257,000, an additional $145,000, compared just $112,000 for the portfolio with no top-ups. That’s more than double! This is the magic of compounding.
No matter how big or small, top-ups have a powerful impact on the growth of your money. Setting-up a regular deposit from your bank account into your Stockspot portfolio is a simple way to start topping-up and super-charge your wealth accumulation.
Already topping up? Consider increasing your top-ups in steps over time to boost your portfolio’s growth even more.
Tip: Use the Stockspot Investment Calculator to see how your money grows with different top-up amounts.
Automate, automate, automate
Automation is the best way to help you manage your investing behaviour because you don’t need to think.
If you don’t have the discipline to manually manage top-ups or find investing gets the better of your emotions, automation will help keep you on track and save you time.
We find a lot of our clients set-up automatic top ups from their external bank accounts. Some of the most popular top up amounts include $100 per week, $200 per month or $500 every two months.
Stockspot also uses automation to optimise the key investment decisions for your portfolio, like when to rebalance. Automation is key to keeping costs low, preventing bad investing habits and making the most of market dips when they happen.
Automating top-ups is a simple, yet effective strategy to help you manage your behaviour and keep you on track! Make it another top goal for 2020.
Keeping a long term mindset (for compund’s sake)
Maintaining a long term mindset when you invest is essential. It’s healthy to remind yourself at the start of each year why you’re investing in the first place – what’s your goal? It might be a home deposit, funds for your retirement, or money for the kids’ future…
The best thing you can do is stay invested for as long as possible to enjoy the benefit of compounding returns.
The examples below show the impact of compounding over longer periods of time by using our calculator. Showing the growth of $50,000 invested for 5 years, 10 years and 20 years earning 9% p.a.
The longer you stay invested the more powerful the compounding becomes, boosting the portfolio’s from $122,568 after 10 years (over double the initial investment) to $300,458 after 20 years (five times the initial investment).
Herein lies the magic of compounding and time in the market!
Stick with your investment strategy and stay invested for as long as possible. Another top investing goal for 2020!
Talk with us
Our team is here to help you with goal setting and staying on track so you can focus on other things in life.
If you have questions and would like to have a chat with a member of our Client Care and Advice team, please get in touch.
All the best for 2020.