Financial Goal Planning

Financial Goal Planning

What’s Behind Your Financial Decisions


The first step to getting smart about money is to better understand how you feel about it. Understanding your LifeValues — the Inner, Social, Physical and Financial drivers that impact your financial decisions — can help clarify your goals and priorities.

Have you ever wondered why you feel good about spending money on vacations, but avoid saving for retirement? Or why you buy new golf clubs, but procrastinate when it comes to giving your kids an allowance? The answer may lie in your unique LifeValues and how they influence your financial decision making.


Most of us don’t realize what’s behind the thousands of financial decisions we make every year. And, if we are in a relationship, we are even less certain about why our partners make the decisions they do. Taking the quiz with your partner or spouse will enable you to better understand each other’s financial motives and priorities together.

Get Organized

Make Time to Manage Your Money


Getting organized is an important step toward a financially fit lifestyle. This requires managing your financial documents, and also your time.

Consider financial planning part of your normal routine. Just as you would schedule time to go to the grocery store or the gym, you also should plan time to maintain a healthy financial life. Dedicate time each week to thinking, talking and learning about money management. Commit 30 to 60 minutes each week toward financial planning, and talk with your spouse or partner about developing a plan together.

Know Where Your Money Goes


It is possible to gain control of your financial situation, but first you must recognize where your money goes. Start by jotting down everything you think you spent money on last month. Next, locate your most recent bank and credit card statements to see what you actually spent. Be sure to note everything you bought and how much it cost. Include rent, car insurance, groceries, small purchases such as coffee or snacks, and fees from your bank or credit card. Use the Spending Detective worksheet to get started.

Plug Spending Leaks


Once you see exactly how you spend your money each month, you probably will notice areas where small amounts of money seem to disappear. These are called spending leaks. Examples of spending leaks include buying expensive coffee drinks daily, eating lunch out, and making impulse purchases. While it may not seem like you’re spending much at the time, these leaks can add up to quite a bit of money over a month or year.

Once you’ve identified your spending leaks, you can determine ways to plug them by making small changes in your habits. For example, if you buy lunch at a restaurant or cafeteria every work day, you probably spend at least $10 each time. That adds up to $50 a week, $200 a month, and $2,400 a year. If you weren’t spending this money on lunch, you could use it to help accomplish your life goals, such as paying for your child’s education or your own retirement.


Save For Your Future

Pay Yourself First


Saving money is not easy, but it is essential to achieving financial well-being and securing your future. One of the best and easiest ways to save money and start a strong retirement income planning program is to pay yourself first. Every time you receive a paycheck, save a certain percentage of your income before spending money on anything else. You may choose to have your bank automatically transfer a certain amount of money from your account to your savings each month. This way, the money never hits your pocket, so you don’t miss it.

You also can make saving easier by putting raises, bonuses and tax refunds in savings rather than spending them right away.

The Time Value of Money


The earlier you start saving and retirement income planning, the better. No matter where you are in life, begin saving today and you’ll be that much further ahead tomorrow. When you put money into a savings account or investment vehicle, the amount you originally save is called the principal. The principal amount earns interest, which then is added to the original principal. This amount then earns interest, and so on. This process is called compounding


Saving Versus Investing

You should think about the money you save as falling into three categories: money for an emergency fund, money for short-term purchases, and money for long-term goals. Money for an emergency fund and short-term purchases should be kept in an easily accessible savings or money market account. You also may consider keeping this money in a Certificate of Deposit (CD), which may earn more interest than a savings or money market account. CDs require you to leave the money there for a certain period of time, and money market deposit accounts typically require you to maintain a high minimum balance. Money for long-term goals can be invested in assets such as stocks, bonds or mutual funds. These assets possess more risk than traditional saving vehicles, but they have the potential to earn more


Set Financial Goals


Perhaps you’d like to take a vacation next summer. Or, maybe you hope to go back to school in the next five years. Whatever your goals might be, you have a better chance of achieving them if you write them down. As you list your goals, divide them into three categories: short-term, medium-term and long-term.

Short-term goals might include buying a new computer or paying off credit card debt.
Medium-term goals could be purchasing a car or going back to school.
Long-term goals might include buying a home or retiring with enough money to live comfortably.
SMART goals – specific, measurable, achievable, realistic, time-bound
Try to set SMART goals. These are goals that are Specific, Measurable, Achievable, Realistic and Time-Bound. Make sure you prioritize your goals. Which ones are the most important to you? Work toward achieving these goals first.

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