How to manage your finances when you have no financial goals

Not everyone wants to retire early, buy a house or needs to pay student loans off. If you happen to be a person who, right now, has no specific financial goals, this article is for you.

I have no interest in convincing you that you should set goals because frankly, if you want to plan something, you can do so without a stranger on the internet telling you to. Instead, there are some things in life which most of us go through, and these are the ones I’d suggest you sort out for yourself first.

When things break

Well…things break. Just how badly, depends on your personal circumstances, accommodation you live in and how adventurous your life is. Many financial ‘gurus’ suggest having an emergency fund of at least $1000 for yourself, but that doesn’t make sense for everyone. Instead, what are the top 3 things which would make your life miserable, if they broke? And how much would it cost to replace them?

Your first action in managing your finances will be ensuring that you can take care of the things that make your life comfy and safe well. In my case, the top 3 are my cats (admittedly they’re not ‘things’, they’re furry family), hot water and heating boiler and electronics I use for work. If I needed to use a private vehicle to get places, I’d probably have that on the list too, but it’s not something I need where I live. If I were in a country without public healthcare, copay would also make it in the list, turning it into top 5.

Regardless of whether your list is 3, 5 or 10 things, there are two ways you can take care of these. One is through obtaining suitable insurance, and second one through creating a pot of money which you can use for them. You can calculate how much money should be in the pot based on either repair or replacement value of the items on your list.

Old and rich is better than old and broke

Nobody says we should all retire at 40, 50 or whatever the new FIRE age trend is. But, regardless of your feelings on retirement, if you plan to stop working at any point, you will need an income from somewhere and counting on state pension is not a good idea.

Again, this income problem can be managed through more than one way. The most popular option at present seems to be investing into private pension or other form of stock market portfolio. The second way is investing in other money-generating assets, such as rental properties, land or bonds. Whichever one or mix of the two you pick, designate some money to go towards you being not-broke when you feel like retiring. One of the easiest ways to get started is opting in for a full pension match with your employer, if you are working. If you are self-employed, a self-invested or managed stocks & Shares ISA might be a good option too.

Have some fun

Once your emergencies-busting and dying rich actions are in progress, you might want to consider how you deal with the costs of fun stuff you want to do now or in the near future. I don’t mean the monthly ‘restaurant’ money. I mean the once in a lifetime trip or the six times per year city break or finally getting that pilots license you wanted. If it’s something you can’t cash flow easily, start putting some money towards it away now, preferably in a separate bank account. And if your plans change, great, you’ll have some spare change to your name.

Lastly, the ‘run’ money

I talked about this before – no matter what, always have that stash of money separate to any other money you might have. Use it when you suddenly burn out at work, run into trouble with your family, or just feel like suddenly you need a big change of scenery. I don’t know how much you might want to put in it, it all depends on where you live and where you might want to run to. But whatever it might be, just make sure to do it!

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