You wouldn’t travel to a new destination without your GPS, would you? The same should be said for your finances. It’s impossible to reach your financial dreams without a clear path. That involves setting well-defined goals and establishing a roadmap for achieving them.
Here are some basic steps to get you started:
What do you want to accomplish? Establish an emergency fund? Build college savings for your child? Have a large retirement fund by age 60? Create a list of your major goals and separate them by needs (must haves) and wants (like to have).
Adding timing to the equation helps you begin to see how you need to save or invest and what kind of financial vehicles to put to work. The earlier you define each goal, the more time you have to try and achieve it. To put this into practical terms, assign a timeframe to each need and want — say 1 to 5 years for short term, 10+ years for long-term and 5 to 10 years for intermediate term goals.
Start with your top three needs and wants and rank them using a simple rating system (say 1 to 3, with 1 being most important). Then, reprioritize them based on time. You’ll want to save and invest for the most important, short-term goals first.
Goals are easier to achieve when they’re broken down into smaller increments. Give yourself milestones along the way. Reaching them are affirmations, reinforcing that you are on a positive path to your ultimate destination.
Goals are the pathway to your financial success. It’s easier to dedicate yourself to a goal rather than a hope or wish. Commitment is important, and saving and investing usually comes with some degree of personal sacrifice.
Keeping your goals in sight may help you avoid making frivolous purchases you might later regret or taking on a big debt that might impede your progress.
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