Financial Goals

The S.M.A.R.T.  guidelines work well for financial goal setting.  Some common financial goals people have are sending kids to college, retirement and large purchases such as a house or a car.

Applying S.M.A.R.T.  to these goals would looking something like this:

Specific:  Being specific would be setting a dollar amount on the goal.  How much do you want to pay for your child’s college education?  That will depend on the college the child attends and what percentage of cost you as a parent plan to pay.  Use a college funding calculator found on many websites to help you determine the amount you need to save.  There is a link on this blog for your convenience.

http://www.savingforcollege.com/college-savings-calculator/

Retirement is another common financial goal.  A rule of thumb for retirement is 75% to 80% of your current income.  And you have to decide when you want to retire – how many years of retirement do you need to provide for?  If you plan to retire at 65, you would look at 20 years.  Life expectancy is mid-80s.  You may come from a gene pool that you need to plan into your 90s.  Many retirement calculators are available.  Here is an option:

www.finra.org/retirementcalculator

Measurable:   Knowing the total dollar amount you need to save is the first step.  Breaking the total into smaller monthly amounts makes it easier to accomplish.

Achievable:  Technology has made monthly savings easier.  You can automatically make deposits into 529 plans for college or into savings accounts for emergency reserves.  401(k) plans also allow you to easily save with monthly payroll deductions.   Using the automatic options with banking and payroll deductions is a good tool to use to achieve your goals.

Realistic:  Saving for college and retirement are long term goals.   If you start early and are consistent with investing, you can reach your goal.  But what if that isn’t the case?  What if you are just starting?  Then you need to be realistic in what you can do.  You need to choose a less expensive college.  You may need to work a little longer before retiring.  To be realistic, you may need to adjust your goals.

Time:   Most financial goals have a time frame of when the monies are needed – for college or for retirement.  You have a deadline to work towards.  However, it isn’t uncommon to become more disciplined in saving the closer a person comes to the goal date.

Achieving your financial goals requires a plan.  This plan is usually called a budget.  For the more free spirited individuals, you may refer to it as a spending plan.  Next week we will look at simple steps to creating an effective budget/spending plan.

 

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