How Setting Your Financial Goals Now Will Give You a Roadmap to Your Future
Imagine yourself on December 31, 2020. Did you meet your financial goals for the year? Did you accomplish what you set out to do in your business? We hope so!
If you didn’t, don’t lose heart… because, let’s face it, it has been a pretty hectic year for everyone.
What we want you to start thinking about as we near the year’s end, is your financial goal setting for 2021. We know, we know… it’s not the most exciting thing to be thinking about as we gear up for Christmas, but it really is worth it.
But what exactly does financial goal setting mean? Is it weekly spending? Budgets? How and when to pay bills? Investments?
Well, it is a little bit of each of those and a bunch more.
Let’s put it this way: financial goals are savings, investments or spending targets you hope to achieve over a set period of time. Setting short-term, mid-term and long-term goals is an important step toward becoming financially secure – we all want that, right?
If you aren’t working toward anything specific, you are likely to spend more than you should. You will then come up short when you need money for unexpected bills, not to mention when you want to retire (even if that is a long time away).
Annual planning gives you an opportunity to formally review your goals, update them, and evaluate your progress since last year. If you’ve never set goals before, or it was a long time ago, this planning period gives you the opportunity to formulate them so you can get to, or stay on, firm financial footing.
And it all starts with a budget… your roadmap to ensure you are on the right track to meet your financial goals. Your budget doesn’t have to be fancy or complex to be effective. But it should include an estimate of monthly revenue and expenses, profit and loss expectations and statement of cash flow.
Here’s what you need to consider:
- Profit and loss is simply the numbers that tell you at a glance whether you’re making money or losing it. Subtract your expenses from your income, and voila, there are your profit and loss figures.
- Income is how much money you’re generating from sales of your products or services.
- Recurring income is reliable income from client retainers and contract work.
- Expected income is predictions of future income. This is a forecast of what your business is likely to earn.
Meanwhile, expenses are how much money you are spending on business costs such as staff, raw materials and marketing. Break your costs into recurring (monthly payments such as rent, utilities, payroll etc) and sundry (occasional payments, office supplies, etc).
Budgeting isn’t a one-off exercise (sorry to tell you that!). It really needs to be monitored and updated regularly. If you’re just starting out, monthly is a good idea to begin with. Then quarterly, and definitely yearly.
Use your budget to help you make business decisions in the short and long-term. If you are spending too much, look for ways to cut costs and avoid spending money on anything that isn’t essential to running your business. If you have extra funds, terrific! Maybe use that money to reduce debt, create financial security or grow your business. If you anticipate a large expenditure one or two years down the road (maybe for computer upgrades, or a larger premises), your budget is going to help you get there.
And that right there is why budgeting is the starting blocks for financial goal setting.
We know numbers aren’t everyone’s bag, but they are ours. So, if you need a hand fine-tuning your financial goals and setting budgets, you know where we are.
We want you to open up your 2021 calendar, to have all your loose ends tied up and to look ahead with anticipation and excitement in your business, because there really is nothing quite like the fresh start of a new year.
Find more great tips, stories, and other seriously useful information in our Knowledge Centre.
Disclaimer: Whilst this publication has been carefully prepared it is written in general terms and is intended as general information and to provide commentary. It does not purport to be comprehensive or render any advice. No one should rely on information contained in this publication without first obtaining professional advice relevant to their specific situation.
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