Setting your financial goals header

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Setting financial goals

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Setting Financial Goals
January 2004

The key to short term and long term financial success is setting financial goals. If you have specific, achievable, tangible goals, you have something to aim for. Instead of simply saying to yourself, "I want to have a comfortable retirement" and going about your regular business, you need to outline what that comfortable retirement is. It could be... "I want to have $800,000 when I retire, have my house paid off and I want to have $40,000 a year to spend."

Now that's a financial goal to aim for!

When you set financial goals, it is important to divide them into timeframe groups such as 6 months, 1 year, 3 years, 5 years, 10 years, etc. in the future. The short term goals would be more immediate, such as "I want to replace the washer and dryer", three years may be "I want to buy a new car", 10 years may be, "Pay for 80% of my children's college costs".

To start outlining your financial goals, simply write down what your financial goals are without thinking about what timeframe to put them in. Just brainstorm and come up with as big of a list as you can. Have fun and add specific details to make them more real to you!

After you have your list, start to categorize them into various timeframes. You may find that you may need to consolidate or remove some. Organize columns and fit each goal within it's column timeframe.

The third and most important step is to figure out how to achieve these goals! This is where developing a family or personal budget come into play. You may need to consolidate your credit card debt by using a home equity loan. What is so very important with this step is to match your goals by timeframe with your goals that you categorized. For example, you may calculate that if you want to buy a car in 3 years, you will need to set aside $150 a month. Or if another goal is to have $80,000 for your child's education, you need to open up a 529 college savings plan and put $300 a month away.

Match your financial goal with actions that you take today!

Finally, it is very important to reevaluate your progress periodically. Maybe every 3 months (4 times a year), sit down and see how well you are progressing. If you find that you have not saved enough, find out why. Are you eating out for lunch at work instead of brown bagging it? Going out to dinner too often?

Remember that setting financial goals involves delayed gratification in some ways. Try to associate bringing your lunch to work with the pleasure in knowing that you are taking action for a pleasant financial retirement, or living in a home that is completely paid off!

If you prefer to get really automate the budgeting process, consider Quicken. I have used Quicken for over 10 years and recommend it 100%. Click here to download and get started with Quicken Premier.


Picture - household budgeting


Todays Tip!

I've saved thousands for my kids college fund without contributing one cent!

Click Here to Find Out How!