Two factors commonly influence your financial aspirations for the future. The first is the time frame in which you would like to achieve your goals. The second is the type of financial need that drives your goals. TIMING OF GOALS What would you like to do tomorrow? Believe it or not, that question involves goal setting. Short-term goals are goals to be achieved within the next year or so, such as saving for a vacation or paying Off small debts. Intermediate goals have a time frame of two to five years.
Long-term goals involve financial plans that are more Han five years Off, such as retirement savings, money for children’s college educations, or the purchase of a vacation home. Long-term goals should be planned in coordination with short-term and intermediate ones. Setting and achieving short-term goals is the basis for achieving long-term goals. For example, saving for a down payment to buy a house is a short-term goal that can be a foundation for a long-term goal: owning your own home, Goal frequency is another ingredient in the financial planning process.
Some goals, such as vacations or money for gifts, may be set annually. Other goals, such as a college education, a car, or a house, occur less truculently. GOAL-SETTING GUIDELINES FROM CNN/Monetary are your top three financial objectives? Most people, when asked that question, answer with general goals, such as “achieving financial security,” CNN/Money offers a framework for financial goal setting,F-iris, focus on a few main financial objectives. Make a list of all the things that you’d need to feel secure, happy, or fulfilled. This action will allow you to better achieve what is most important to you.
Be ready for conflict. Decide which goals can be delayed r ignored. Paying for an auto repair may take money from your retirement savings. You can use “The Prioritize”‘ at vim. W. Money. Com to help you rank the items in order Of importance. Next, Start working on the financial aspects. Money deposited in savings or investment accounts will start to increase in value. For example, if you put aside the cost Of a single candy bar (about 65 cents) each day, invested in a tax-deferred account paying 5 percent a year compounded monthly, those savings would grow to $3,073 in just 10 years and to $16,470 in 30 years.
Finally, be prepared for change. Your needs and desires will change as you age. Efforts to identify the financial goals that matter most to you will make sure that you get what you want most. Be sure to: (I) decide which goals take priority and (2) work toward the lesser goals only after the primary ones are being addressed CNN/Money offers a savings calculator and other financial planning tools at www. Money. Come GOALS FOR DIFFERENT FINANCIAL NEEDS Goal of obtaining increased career training is different from a goal Of saving money to pay a semiannual auto insurance premium.
Consumable-product goals usually occur on a periodic basis and involve items that are used up relatively quickly, such as food, clothing, and entertainment. Such purchases, if made unwisely, can have a negative effect on your financial situation. Durable-product goals usually involve infrequently purchased. Expensive items such as appliances, cars, and sporting equipment; these consist of tangible items. In contrast, many people overlook intangible-purchase goals. These goals may relate to personal relationships, health, education, and leisure. Goal setting for these life resistances is also necessary for your overall well-being.
DID you KNOW? A survey conducted by the Consumer Federation of America (SFA) estimates that over 50 million American households will probably fail to realize one or more of their major elite goals largely due to a lack tot a comprehensive financial plan. In households with annual incomes of less than SOCIO,OHO, savers who say they have financial plans report about twice as much savings and investments as savers without plans, I GOAL-SETTING GUIDELINES An old saying goes, “If you don’t know where you’re going, you might end up morpheme else and not even know it. Goal setting is central to financial decision making. Your financial goals are the basis for planning, implementing, and measuring the progress of your spending, saving, and investing activities. Exhibit 1-4 offers typical goals and financial activities for various life situations. Financial goals and activities for various life situations I Your financial goals should be stated to take the following factors into account: I _ Financial goals should be realistic. Financial goals should be based on your income and life situation.