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Here's how you can meet all your financial goals

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Charné is a Registered Tax Practitioner and has written several magazine articles with financial related themes since 2006. She is a known finance and tax expert working as an adviser at lemons into lemonade financial planners cc.

Short term financial goals are typically goals that you want to achieve within the next year or three.  

Before you start saving towards your short term goals,  you need to have an emergency fund in place already.  An emergency fund are cash savings that you have quick access to and you need to have about six months’ of your income in this fund.

Once your emergency fund is in place, you can start saving towards your short term goals.  The money you save to achieve your short term goals must be available on short notice.

Examples of short term goals are :
•    short holidays;
•    paying off store accounts or credit cards;
•    a pair of sunglasses or a laptop or smartphone;
•    household appliances like a fridge or washing mashine;
•    annual expenses like your dog or cat’s visit to the vet;
•    expenses that you only have every two years like replacing car tyres;
•    small renovations to your house;
•    changes to an alarm system for example adding outside security beams;

Here is a practical example of how you would go about reaching a few short term goals.  

Mrs Jenkins has set up a list of her short term goals and what each would cost.  The total is just under R45,000.  For her to reach this goal in 3 years,  which is 36 months,  she has to save R1,236 per month. (R44,498 ÷ 36 months = R1,236 per month).  Prices of certain items may increase over the next three years,  so in this example,  it will be better if Mrs Jenkins saves up at least R1,400 to R1,500 per month in order to achieve her short term goals.

Short Term Goals (1 to 3 years)                                              Amount
Holiday to Durban for 5 days                                                      5,500
Paying off store accounts or credit cards                                    20,000
Laptop                                                                                        4,499
Sunglasses                                                                                 3,000
Washing machine                                                                       3,899
Annual visit to Vet for dog & provision for vet costs                   1,000
Replace car tyres every two years (4 tyres at R900 each)         3,600
Small house renovations (per room/ paint and material)           3,000
Total : Short Term Goals                                                             44,498

*Please note that these amounts are examples and do not represent the actual costs of each item.

How to save for medium term goals

Medium term financial goals are goals you want to achieve in the next four to ten years.

The money you save to achieve your medium term goals must be available within at least a few months.

Examples of medium term goals are :
•    expensive local or overseas holiday;
•    wedding or engagement ring;
•    preparing for school fees for toddlers;
•    deposit for a vehicle;
•    more expensive sound equipment or computer;
•    built-in swimming pool or paving;
•    medium size house renovations or building a wall around your house;
•    installing a new alarm system in your house;

Here is a practical example of how you would go about reaching a few medium term goals.  

Mr Jones has set up a list of his medium term goals and what each would cost. The total is just under R45,000.  For him to reach this goal in ten years,  which is 120 months,  he has to save R2,908 per month. (R348,900 ÷ 120 months = R2,908 per month).  Prices of certain items may increase over the next ten years,  so in this example,  it will be better if Mr Jones saves up at least R3,500 to R4,000 per month in order to achieve his medium term goals.

Medium Term Goals (4 to 10 years)                              Amount
Overseas holiday                                                             40,000
Wedding (assuming parents also contribute)                  60,000
Schoolfees for toddlers (full 12 years at school)             122,400
Deposit for vehicle (10% on R200,000)                           20,000
Expensive Computer or Sound Equipment                      22,000
Swimming pool (Splashpool)                                           45,000
New Alarm System                                                         14,500
New wall with steel gates                                              25,000
Total : Medium Term Goals                                             348,900

*Please note that these amounts are examples and do not represent the actual costs of each item

How to save for long term term goals

Long term financial goals are either goals with a big financial commitment or goals that you want  achieve in your lifetime.  

Examples of long term financial goals include :
•    funds for your children’s education after Grade 12;
•    saving for your retirement;
•    big once-off expenses like purchasing a vehicle in cash or large house renovations;  and
•    saving up for costs and deposit to buy a property.

The money you save to achieve your long term goals must not be too accessible.   Retirement money may only be accessible when you are 55 years or older.  

Buying property,  saving for retirement and children’s after-school eduction are three well known long term goals.  Let’s take a look at each of them and what you need to know about each of these goals.

Retirement

You can achieve your long term goal for retirement by saving your money in a pension fund or a retirement annuity,  where you only have access to your money from the age of 55 years onwards.

Long Term Goal : Retirement                                          Amount    
Age now                                                                                  28     
Age at retirement                                                                    65     
Years to save for retirement                                                    37     
Current Salary per month                                                       15,000     
Income required in today's value when you retire                 10,000     
Amount in today's value required for retirement                    1,200,000     
Save every month                                                                  2,703     (18%)

*Please note that these amounts are examples and do not represent the actual costs of each item.
Property

attorney fees for transfer costs
bank and attorney fees for bond registration costs
deposit
tax on property over R750,000
changes when you move in

Long Term Goal : Property

Age now                                                                                      28
Age buying property                                                                     40
Years to save for property                                                            12
Property you want to buy (value today)                              750,000
Costs to buy property including 10% deposit                       115,000
Need to save each month if house prices stay the same             799
Need to save each month if house prices increase                   1,000

*Please note that these amounts are examples and do not represent the actual costs of each item.

Children’s education

Studies
Transport
Accomodation
Food
Books and other resources

Long Term Goal : Children's Studies    Amount
Cost per month for studies,  accommodation,  transport                   7,000
Years to study                                                                                          4
Total Required                                                                                336,000
Age of Child now                                                                                       9
Age when finishing studies                                                                      22
Years to save                                                                                           13
Need to save each month with current study prices                           2,154
Need to save each month with increased study prices                        2,700 (25%)

*Please note that these amounts are examples and do not represent the actual costs of each item.

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