Smart financial planning is necessary no matter your age or relationship status. What do you want to achieve financially? What are your dreams? Where would you like to be five years from today? Ten years?
It is important to not only set financial goals but put a plan into action to help you achieve them. Your goals are necessary for good financial health. Knowing where you want to go will help you develop a smart plan for achieving your goals.
HOW TO SET FINANCIAL GOALS
WHAT DO YOU WANT TO ACHIEVE?
You need to determine your short-term and long-term goals. Goals often include things such as being debt free, dream vacation, buying a new car or increased wealth. Your goals are just that – yours. They do not belong to anyone else. No one else can claim them. While they may end up being similar, they are never completely the same.
A few financial goals may include:
- Setting personal savings
- Fully funding your emergency account
- Building up your retirement savings account
- Establishing your investment portfolio
- Going on your dream vacation
- Replacing your automobile
- Getting out of debt (or reducing the amount you owe)
SETTING GOALS WITH YOUR SPOUSE OR PARTNER
Sit down with an open mind. Each of you should present 1 – 2 financial goals you have that you think would be attainable. Make sure you explain why you want to reach it. It might have been something you have wanted since you were a teenager or it could be that you can’t stand to cook on that cracked countertop any longer.
As your partner shares his or her ideas, listen. Don’t talk. Allow the entire idea to be presented. Make a note of what it would cost to reach that goal.
Once your partner is done, then it is your turn. You too will be given the same courtesy to outline your goal and explain why it is important to you.
Once the discussion is over, look at them together to find a way to agree. You may realize that some of your goals actually align. For instance, you might want a place to workout and your partner wants to finish off the basement. Those might work well together.
Getting on the same page about finances is half the battle. Keep those same lines of communication open as you find new ways to approach your goal.
WHAT DOES YOUR GOAL COST?
Once you know your goals, you must know the cost associate with them. It might be a fixed cost, such as a vacation. It could even be a variable cost, such as increasing retirement savings.
List each goal and give it a value. This allows you the understanding of the cost associate with your goals.
PRIORITIZE YOUR GOALS
You may have five goals on your list. Some will be wants and others will be your needs. For instance, your son may need braces. However, you might want to save for that expensive driver to up your golf game. The savings priority should first cover the needs on your list and then, you can begin the focus on your wants.
Just make sure that you revisit your goals every month or two, as your needs will change. What was a priority last month may not be such this month? Goals are always changing and you need to be flexible and change with them.
HOW TO REACH YOUR GOAL
Now that you have the goal in mind, next up is to figure out how you will fund that. Together, brainstorm what you can do, together and individually, to get closer to that goal. Is it time for a garage sale? Can you live without cable?
Consider creating a special joint account to give your money a place to grow. Several credit unions and banks allow you to name your accounts so you could label one ‘vacation’ or ‘dream home’ for extra inspiration. Each of you should put money from your monthly paychecks to put into this account.
How much is up to you, but it should be related to how much you bring home. I’d recommend setting up automatic deposits this way the money is automatically transferred eliminating any desire you might have to spend it now.
CHECK YOUR GOAL FREQUENTLY
Lastly, it’s important to revisit your goal(s) every few months. Life can change pretty quickly and you may need to make adjustments. However, if you and your partner are rolling with the changes together, nothing can slow you down.