In my post dated September 25, 2017, we addressed the subject of financial planning and the importance of having a financial plan in place. In it we discussed the seven roadblocks to creating and executing a financial plan as well as the six keys to financial success. Here is a link to the post to review: Do You Have a Plan?
Because a well designed and executed financial plan is so important for your financial success, I will periodically return to discuss it in more detail.
The first roadblock to achieving financial success is to have no goals. If you have no goals, you have no direction and no way of knowing whether you are on track. Goals are critical to financial success and are a fundamental part of the financial planning process. You need to figure out what matters most to you. Goals are broad-based intentions that have dollar amounts associated with them. Financial goals can address your immediate needs, your long-term dreams and everything in between. For example, a goal might be to buy a house, pay for your children’s college education or to retire comfortably.
When thinking about setting financial objectives, you first need to understand your current financial situation. Determine how you are currently spending your money. You need to determine what your wants are versus your needs. This is an eye opener for many people. At this time you should also assess your debt.
With a good picture of your current financial situation in mind, you can determine what goals you would like to reach in the upcoming months and years. When you are setting goals, remember that financial goals need to be:
- Specific – Your goals should be specific and clear. Describe what it is that you would like to accomplish.
- Measurable – Financial planning goals also need to be measurable. This will ensure that you know what success looks like and will be able to determine when you have accomplished it.
- Attainable – All goals and objectives need to be attainable. However, this does not mean creating easy goals, just goals that are realistic and feasible.
- Relevant – Ensure that what you are striving for fits your desired lifestyle. It is also helpful if you create a series of hierarchical goals that come together to accomplish larger objectives.
- Time-bound – List the specific dates by which you would like to accomplish each and every one of your financial goals. This will help motivate you and keep you on the right track.
Some specific goals might be:
- I want to pay back my student loans by the time I am 30 years old.
- I want to save $100,000 to pay for my child’s college education by the time he is 18 years old.
- I want to save $10,000 for a down payment on a house over the next 5 years.
How to make your goals happen is the next step in the financial planning process. This is the step where active financial management and professional guidance are essential. Properly planning and strictly adhering to your timeline will make it much easier for you to attain your financial goals and objectives.
Until next time, cheers!
Jim