Good day and Happy Christmas, New Year and any day that you are reading this post on. I am writing this on Christmas Day because Omicron has somewhat dismantled our plans to spend the time with our family (who lives abroad on both mine and Mr’s side) and I needed an activity to keep my brain from spinning. Well, I picked somewhat poorly, because planning my financial goals can make even the bravest shrink sometimes and I wonder if doing scary things on Christmas is the right way forward. But let’s put concerns aside and get to planning.
Map out your financial goals
Let’s do the first things first. Setting goals is exciting, but sometimes also scary. If you’re the sort of a person that responds well to the ‘scary’, I see you and I stand with you. But I am also by nature a little conservative, so my goals will be within the reach for 2022. And there are few:
First and foremost, I need to rebuild my emergency fund back to £20k. This might sound like a little or a lot and for me it’s not a small amount but also an equivalent to approx 12 months of my living expenses. I have spent my EF when purchasing an investment flat recently and it’s important that now I build it back up.
Secondary, I’d like to commit to putting £500 per month into my stocks & shares investments. This equates to £6000 per year and is reasonable in my eyes, possibly even on the low side.
Next, I’d like to replenish my cats EF to £3000, up from £1000 as they are no longer kittens and likely to become more prone to health issues. I don’t use pet insurance as the costs are higher if I am to self-insure.
After my cats, I’d love to put aside some money from my properties income which then can be used to refresh the property I bought in November, and of course for taxes and service charges. The property I have in mind is a lovely flat, however it is dated and while still serviceable and easy enough to rent, it will need everything expect for the kitchen done in the next 1-2 years. That includes a full bathroom refit, some new electrics and making good that comes with tearing through walls to extract cables, flooring, windows because some have blown seals and even interior doors. I have no plans to flip the property, but I have plans to make it more profitable and less maintenance-heavy. I expect it will cost around £15-£18k to refurbish and I’d like to have at least half of that by the time I hit December 2022. My estimated income tax will be around £6k on top of that.
Finally, savings-wise, I’d like to have some fun and travel money available to me again, as and when needed. I know that I’ll be seeing one side of our family in March and the other in May and both occasions will involve gifts for newborns and children. Separately, I tend to travel whenever possible to destinations I’ve never been to and I am truly hoping that Covid calms the heck down because two years lost to it is really one year too many. It would be great to have around £3k available to see me through the year.
Map out your sinking funds and how much they’ll cost you per pay period
Now that I have a broad idea of my goals, it’s time to put a list of sinking funds together and map out how I am going to reach them. It will look something like this based on my goals:
|Sinking fund||Total expected||Payment per pay period||No of payments to complete||Priority|
|EF – Monika||£20,000 (have £8k)||£1000||12||1|
|Stock market ISA||£10,000 (Have £4k)||£500||12||2|
|EF – Cats||£3,000||£250||12||2|
|Property investments||£14,000 (Have £500)||£1,125||12||3|
|Fun & travel||£3,000||£250||12||4|
I am lucky enough that I can cashflow pretty much any typical bill that comes my way and will do so for things like council tax, utilities and any other normal expenses. I’ve done away with Christmas/major holidays sinking funds and simply assume the costs in my budget. To make that work I keep my eyes peeled on gifts as the year goes rather than waiting until the last minute. I also live in a place where a car is not needed so I don’t have to worry about the costs of running a vehicle. If your situation is different, add in the things which you need to save for. For me these used to include:
- Christmas & birthdays
- Service charges
- Insurance renewals
- Boiler servicing
- My own birthday expenses
- Private dental
- Annual gym membership
- Cats annual shots, quarterly worming and monthly flea treatments for the year
Yours might looks similar or completely different – these will naturally very depending on your lifestyle and circumstances. But let me mention the elephant in the room. £50,000 is a lot of money. Can I put so much away in a single year remains to be seen – my work income is only slightly higher than that and with significant chunk already going towards my pension, it definitely won’t cut it on it’s own. I obviously have income from my investments too, but again, the one coming from the properties is largely tied into the mortgage payments. This leaves me with limited choice – either make it happen by creating more income or let some things slip.
Prioritisation allows me to let some things slip and I’d encourage you to also put your sinking funds and goals in order of priority, just in case something has to go.
Automate your financial goals
I once heard that if you set it and forget it, you have a higher chance of not messing things up in terms of finances. And empirically, I can say that it’s true. Therefore for my priority 1 & 2 items, I’ll be automating the payments to go straight to where they need to go. For my other priorities, I’ll be making the payments manually simply because some of these goals might become unrealistic as the year goes and as such will need rethinking. If you don’t like the idea of automating your savings or are on irregular income preventing you from doing that, you could consider learning algorithm based apps which help to automate things for you, but since I don’t use them myself, I will not recommend any and instead encourage you to do a spot of research yourself.
Over to you
Now that you have a good visibility of my financial plans for 2022, what are yours? If you haven’t already, put pen to paper and make them real.