Be SMART to achieve your savings goals. Keeping your targets in focus is important to help you achieve your savings objectives.
National Savings and Investments (NS&I) recently issued research which suggests that those with a specific goal save faster and up to £550 a year more than people who do not. There are more interesting findings from the Behavioural Insights Team (more commonly known as the Government’s “Nudge” Unit) which were recently covered on Radio 4’s MoneyBox programme.
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Rather than being a dour monthly exercise in personal austerity, setting SMART targets – that stands for Specific, Measurable, Achievable, Realistic and Timely – can help you focus on the real reasons for saving.
Specific – not “I want to save more money and retire young”; more like “I want to save an extra £X/month and retire aged 60 on £20,000”
Meaningful – instead of “I need to save more because I read about a pensions / cost-of-care crisis”; focus on “I want to pay off x% of my mortgage within 10 years to allow me to be able to fund my daughter’s university tuition fees”
Actionable – not, “I really should tighten my belt” ; more like, “I will set up a personal budget in Excel and use it identify monthly overspends and potential savings”
Realistic - rather than, “I will stop going out for the rest of the year and eat less”; try, “I can target earning £X more and saving £X this year (for example, through switching energy supplier, checking the rates on my savings products, switching credit cards, re-mortgaging etc)
Timely – instead of weak resolutions such as “I’ll try my best and see how long I can keep this new budget up for” try, “I want to have paid off £X of my mortgage and saved an additional £X to my pension pot by Christmas”. This includes regular progress reviews and making upfront commitments. For example, committing to overpay your mortgage by a certain amount each month and setting your payroll pension contributions (and hopefully matching employer contributions) higher so each event/transaction is “hardcoded” into your monthly budget.
Fintech advances are providing tools which help you visualise and automate the above but choosing SMART goals is still the key. More useful tips are available at the Money Advice Service website.