Why it pays to follow these financial rules: Sarah Coles

This approach is great for any big financial goal. Specificity is key, so if you’re building a property deposit, for example, you’ll make far less progress thinking you’ll save ‘what you can afford and then buy at some point’ than if you say you’ll ‘invest £200 a month and buy in 7 years’. Likewise, if you want to ‘spend less’, it’s much harder to achieve than if you plan to cancel your pork pie subscription and move to a fixed rate energy deal.

‘Time-bound’ is an odd way to put it, but you need an end date on your project too. Retirement is a perfect example of this. People who want to retire ‘early’ are far less likely to know what they need to do to get there than those who want to retire in five years. The timescale helps you prioritise.

It also helps you see your way through to solving an issue. If, for example, you don’t have any emergency savings, the thought of building up a pot to cover 3-6 months’ worth of essential expenses can seem impossible. Bringing a timescale into the mix helps you see how to do it. You can stop thinking ‘how on earth will I save thousands of pounds?’ And start thinking ‘I can do this if I stick to saving this specific sum every month for the next two years.”

Staying ‘realistic’ and ensuring things are ‘achievable’ is vital. If you set a goal that’s way too ambitious, it’s incredibly easy to get overwhelmed and give up. If you tell yourself you need to pay off your credit card in the next couple of months, there’s every chance that you over-commit and by the middle of the month you’re running up debts again, so there doesn’t seem any point. If you set a realistic goal, and stick to it, you’ll feel good about what you’re achieving, which will help you stick with it to the end.

To the usual list I’d add ‘accountable’. When you’re tackling anything difficult, there’ll be a stage where it all feels too hard and you want to give up. This is where you can benefit from having to answer to someone. Some people have an accountability buddy, who they have made promises to. This could be your partner, but if they’re too close to the issue, you can talk to a friend who can be more objective, and help you without being too invested.

I’d also add ‘supported’. Some people want guidance or advice. In the money world this can include everything from a financial adviser helping identify the right approach for you, to guidance from companies explaining how things like investment or mortgages work, or a free Pension Wise appointment from the age of 55, where an independent professional can explain where you stand and what your options are. It can even be a case of speaking to someone you know and trust and asking them to run through the basics. In my world of renovations, it was when I eventually gave up trying to understand how to measure the dimensions of a sink and asked a plumber.

You need to be creative too. Sometimes the simple solution you’d hoped for is stymied, so you need to give yourself time to problem-solve your way out of it. You might, for example, be planning to contribute a specific amount per month for a specific length of time to build your pension, but need to scale back payments for a period, or retire earlier than you expected. In this case, you may need to be creative about how you close the gap – whether it’s by making investment decisions focused on more growth, downsizing, or finding part time work you can manage for a period. Get any support you need to feel your way through a new approach and a better solution.

Finally, you need to be flexible. If you’ve done all of these things, and nothing is going to make your goal achievable, accept your failure quickly and regroup. In my case, because I’m too stubborn for my own good, I set an unrealistic target, and when it proved unachievable, I just told myself I had to find a way to make it work. I was lying down after my back gave up, trying to work out what DIY job I could do the following day without standing up, before I spotted I might be pushing it.

In the end, I’ve pushed the moving day back 10 days and am giving my spine time to recover between painting roughly 300 miles of skirting boards. It means shifting things around, but I can do that while still lying down, so I’ll take that as a win. In the meantime, I’ll settle for the joy of creating a new acronym. I’ll admit, it doesn’t look as clever on a flipchart as SMART, but FASTCARS (Flexible, achievable, specific, time-bound, creative, accountable, realistic and supported) is a goal-setting game-changer.

More pensions, but smaller ones

There’s good news and bad news on pensions. When the government introduced rules that meant most people had to automatically be put into a pension at work, it vastly increased the proportion of working-age people with pensions – from 37% in 2013 to 55% today. Among employees it has grown from 53% to 79%.

However, there are two ugly flies in the ointment. The first is that this has accelerated the move from what’s known as defined benefit pensions (where you were promised a proportion of your income in retirement), to less generous defined contribution pensions (when you’re promised a monthly payment into your pension but what comes out depends on how the investments do). It has removed the guarantees and put the responsibility on pension members to build a big enough pot.

The second is that pension participation among self-employed people is just 19% - because they’re not part of the scheme. Some are put off by the hassle of sorting a pension, others can’t face the cost of saving for their retirement alone, and some have irregular income and don’t like to think of their money locked away in a pension until they’re older. For some, the answer is to pay a minimum amount into a pension and then top it up at the end of the tax year when they know where they stand. For others, a Lifetime ISA may make sense, because they can take the money out (albeit with a penalty) if they really need it. This tends to work best for basic rate taxpayers, because the 25% bonus on contributions up to £4,000 per year has the same effect as basic rate tax relief on a pension, but any income taken from a LISA is tax free, so overall they may be better off.