The importance of planning, goal-setting and living within your means to achieve a comfortable retirement

As you will all know, if you don’t make plans your life will run a haphazard course and could be somewhat disappointing. Planning and goal-setting will provide the means with which to measure your success and milestones. The most productive time to start planning and goal-setting is when you are young, as it can have the greatest impact, however getting involved with this at any age will have a positive impact.

In terms of financial goals, the most effective place to start is with a budget. You need to list all your regular outgoings then work out how much you wish to save, with the balance being used for discretionary items such as travel, eating out and capital items such as new appliances or a new car.

Typically, the most proven ways to get ahead are to save more and spend less, and also earn more. Saving more requires a level of discipline, although this can be made easier by staying focussed on your goal, which may be a house deposit, paying down your mortgage or saving a certain amount for retirement.

One relatively easy way to avoid building debt is to pay for items using an EFTPOS card or a debit card rather than on a credit card, where you can lose track of your spending and not be able to clear the balance each month. Saving needs to become a life-long habit if you wish to accumulate wealth, so start early to let the power of compound interest work for you over time.

If you are paying down your mortgage, work out how much you can realistically pay off over a year and have that portion of your loan on a floating rate.

A good way of accumulating long-term wealth outside of paying down a mortgage is to invest a percentage of your income in a managed fund, KiwiSaver, super fund or share portfolio. Of course, you need to keep this discipline going for many years to see good levels of funds.

One of the simplest ways to accumulate more is to spend less, although this requires a good level of discipline. Reason being, it means going without to a degree, for example it might mean eating out less frequently or decreasing your holiday budget or buying a less expensive car.

Having accumulated decent retirement savings at a younger age takes the pressure off having to work for longer or harder than you want to. While all of this is rather simplistic and straightforward, few people achieve financial independence, mainly I believe because most people either give it little attention or thought, or by the time they do become engaged in it there isn’t enough time to do something about it.