Setting Financial Goals
The best way to achieve what you want in life is to set goals. That may seem trite or cliché, but setting goals actually works. A goal gives you a target something to strive for direction.
Consider your next vacation. Suppose you want to take your children or grandchildren on a special vacation to Disney World in Orlando, Florida. This goal is a terrific one because most people can visualize the popular theme park, or at least that famous castle and Mickey Mouse. You have created a specific goal or objective. You'll find that you are much more likely to put forth the effort to attain your objective when the goal is personal to you.
The next step in the process is to determine how much money you need to accumulate in order to pay for that trip to Disney World. Suppose that four of you intend to make the trip. You decide to drive instead of fly so you reduce your costs. But you still need to have $500 for gas, tolls and parking. Suppose that lodging, food and tickets to the theme park cost approximately $2,000. For good measure, you budget funds for photos, baubles and other souvenirs; that's $200. Now you need to collect $2,700 to realize this magic experience.
Next you need to create a timeframe. In other words, when do you intend to visit Disney World? Pick an exact date for example, May 15 next year or three years from now. By selecting a specific date, you give yourself a reasonable time frame to collect enough money to achieve your goal. On the one hand, this should be far enough into the future so you have time to accumulate the desired $2,700, yet near enough so the goal is within sight. One exception to this might be investing for a retirement that may be many years in the future.
In reality, most people have multiple goals. One way to handle these often-conflicting and competing goals is to prioritize them. And of course, this may mean allocating your money across your goals. You can emphasize those goals that are most important to you over a given time horizon.
For example, if you want to buy a house in five years, this may be the most important goal to you right now. So you might channel most of your free cash toward accumulating the down payment. Another way to stack goals is to prioritize them by time. In other words, handle the goal with the shortest time frame first. In any event, if one of your goals includes building wealth for retirement, then you ought to consider setting at least some money aside every year to achieve this important goal. You will always have short-term goals, so waiting too long to start investing for retirement is a big mistake.
Now that we've discussed the process of setting goals, we should consider some of the more popular goals people strive for today. These include: buying a house or car, building wealth for retirement, getting out of debt, buying a second home, furnishing your home, starting a business, or investing money for your children's and grandchildren's college education. Remember, no matter what the goal is, the key is that the goal is important to you. Then you'll be much more likely to strive to achieve it.
The writer, Joseph Gelb, is a CPA and attorney who co-authored the Personal Budget Planner A Guide for Financial Success and authored How to Build a Million Dollar Service Business (Small Business Advisors, www.smallbusinessadvice.com).