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Investment Planning |
Setting Goals
As life gets more complex, it's only natural to focus on your financial future. Remember, you control your destiny, and with proper goal setting and planning, you can make your life what you want it to be. Important goals should be set, and then modified as major events in your life occur. These life events include starting a new job, getting married, having children, and sending your children out on their own. As these events happen, you'll probably need to reassess your financial goals.
While the concept of personal financial planning may sound intimidating or overwhelming, it's really no more than a three-step process:
- Set realistic financial goals and objectives,
- Develop strategies for achieving these goals and objectives, and
- Coordinate the implementation of these strategies to produce quantifiable results
The first step in the financial planning process is setting goals. You can and should have both short- and long-term goals.
Here are some examples of short-term goals:
- Debt reduction
- Establishing an emergency cash reserve
- Starting an investment plan
- Purchasing a home
- Providing your dependents and yourself with insurance coverage
Some long-term objectives may include:
- Funding your children's college education
- Accumulating funds to maintain your current lifestyle during retirement
- Providing for your dependents and heirs
The second step in the goal setting process is to assess your resources and evaluate your ability to reach your goals. Unrealistic goals lead to frustration. Recognize that your goals will change over time; therefore you should review your goals when life-changing event occurs, such as marriage, the birth of a child, or retirement. A good rule of thumb is to review your goals annually, at a minimum.
If you're married, develop a set of goals that reflects both of your interests by trying this eye-opening exercise: You and your spouse independently list your goals and objectives, in as much detail as possible. You then compare your goals and develop one set of coordinated goals. This exercise accomplishes two purposes. First, it reinforces your commitment to achieving those goals. Secondly, it will either confirm that your individual goals are in sync as a couple or that your goals are dissimilar. Depending how these differences affect your overall goals, you may have some work to do.
You've now determined where you are and have a vision for where you want to be. The third step in the financial goal setting process is to ask yourself exactly how you will get from where you are today to where you want to be.
This is the time to formulate strategies. You may do research on your own and you may ask the advice of a competent financial planning professional to be sure that you've considered all of the pieces of the financial planning puzzle. Here are the five basic building blocks of the financial planning model:
- Tax planning and cash flow analysis
- Retirement planning
- Estate planning
- Investment planning
- Insurance planning
Tips Disclaimer
These tips contain information that may change over time as a result of new tax legislation. Although we make efforts to keep this information current, you should check with your tax advisor before taking action based upon any information contained in these tips.