Creating a financial plan: How to set goals and achieve financial wellness while renting

Renting a home can make it challenging to feel in control of your finances. With rent, utilities, groceries and other expenses to consider, making ends meet can be tricky. To achieve your short and long-term financial goals, it’s important to have a financial plan in place.

Let’s break it down: What is a financial plan?

At its core, a financial plan is a roadmap for managing your finances. It helps you assess your current financial situation, set goals for your future, and create a plan of action to achieve those goals.

A financial plan can be as detailed or simple as you’d like it to be. A basic plan could include budget and savings, or you could take it one step further and include investment strategies, retirement or debt management plans.

It should also help you achieve security in your life, especially while renting, as it’s there to help you stay on top of your finances and plan for future expenses.

Step 1. Assess your current financial situation

Before building a financial plan, you should know where you stand. How much money do you make? What assets do you have? Have you checked your credit report and score? Consider using a budgeting tool to track expenses and income.

Step 2. Set financial goals

Setting financial goals can help you stay motivated and focused. When setting financial goals, make them SMART; Specific, Measurable, Achievable, Relevant, and Time-bound. Here are some examples of financial goals you might set while renting:

» Save for a down payment on a house within the next five years

» Pay off credit card debt within the next two years

» Build an emergency fund that covers six months of living expenses within the next year

» Start investing in a retirement account within the next six months

Step 3: Create a plan to achieve your goals

Once you understand your financial situation and goals, create a plan to achieve them and include specific actions, timelines, and milestones. If your goal is to save for a house, your plan might consist of setting aside a monthly amount, reducing expenses, and researching home-buying programs. Here are some tips for creating a plan:

» Prioritise your goals: Decide which financial goals are most important and focus on that goal first. Once you've achieved that goal, you can move on to the next one.

» Cut costs: Look for ways to cut your expenses so you can put more money towards your goals. This might include cutting back on eating out, cancelling subscriptions you don't use, or downsizing your living situation.

» Increase your income: Look for ways to increase your income so you can put more money towards your goals. This might include taking on a side hustle, negotiating a raise at work, or selling items you no longer need.

» Create a budget: Creating a budget can help you stay on track with your expenses and ensure you're putting enough money towards your goals. Use your income and expense lists from Step 1 to create a budget you can realistically stick to.

» Automate your savings: Set up automatic transfers from your main account to a savings account to save money without thinking about it.

» Track your progress: Set monthly or quarterly reminders to review how you’re going. Spreadsheets and budgeting apps can help you track your progress.

Step 4: Reassess and adjust as needed

Your financial situation can change quickly, so it's important to reassess and adjust your plan as needed. This might mean tweaking your budget, changing your financial goals, or finding new ways to increase your income. Be bold and make the necessary changes to keep your financial plan on track.

It’s also worth considering unexpected expenses and emergencies in your financial plan. This might include medical bills, car repairs, or job loss. Make sure to have an emergency fund to cover these expenses and adjust your plan accordingly.

How does your rental situation affect your financial plan?

Consider your tenancy. Does it change things? For example, if your lease ends soon, factor in the cost of moving, a new rental bond, and potential rent increases.

You should budget for a possible pet bond or a higher rent if you have a pet. If you don’t have a car, factor in the cost of public transportation or ride-sharing services.

Stay motivated and accountable

Find a support system, whether a friend, family member or financial advisor, to keep you on track and provide guidance and encouragement. Celebrate your progress and milestones along the way, and don’t be afraid to adjust your plan if necessary.