In order to have a good financial life, you must know what you are working towards. People who move aimlessly through their financial lives with no clear goals or plans won’t be very likely to have a comfortable financial situation.

 

Setting Your Goal

There are unlimited possibilities when it comes to setting your financial goals. And no two people will have exactly the same goals. It’s a matter of personal values. What’s important to you may not be to someone else.

 

Just think about what is really important to you. Your family? Your goal may be paying for your kids’ college. Your home? Your goal may be renovating your current home. Your career? Your goal may be going back to school yourself. Your retirement? Your goal may be to max out your retirement plan funding.

 

There really isn’t any right or wrong answer here. We would suggest listing all the financial goals you currently have (don’t start saving for your kids’ college before you have one!). Once you have all your current goals written, select the 2-3 most important ones. Those are the ones you should concentrate on first. Also, be sure you know why it’s important to you that you achieve a goal. If you ask yourself that question and can’t come up with a clear answer, maybe it shouldn’t be on the list.

 

There may be some situations where you want to concentrate on one goal before the others. You have debt you want to pay down to free up cash flow, and then you plan on using that extra cash on another goal. Work it out however you feel comfortable with; just don’t sacrifice something that needs to be funded (like retirement).

 

When you prioritize your goals, it shouldn’t necessarily be by the date you want it completed by. People often want to save for their kids’ education and their own retirement, so they will focus on college funding because it will come to pass first, when in reality the more important of the two goals is retirement. Between a choice of having your kids’ college paid for or having to have their support for 30-40 years in your retirement, which one would you choose (and which would your kids prefer)?

 

Retirement

Having “financial independence” in retirement is a goal we often see people set. This usually means not having to rely on any one but yourself for your financial needs, typically with no debt and enough savings/investments to take care of all your needs. It’s a great goal to have, probably one that many people should have, and it’s never to soon to start on it.

 

If you’re 22, just out of college, with nothing to your name, you probably have big goals in mind, which is great! But don’t forget about the future, even if retirement seems so far away. Start funding a retirement account right away, as much as you can, and it will make a huge impact on your financial situation down the road.

 

Moving Forward

Once you decide what your most important goals are, you have to decide what to do about them. It probably won’t be easy, and may require cutting back elsewhere. If you’re saving for something, you’ll need to decide how much it’s likely to cost and when you want it to happen by, and save accordingly. That may seem simplistic, but once you have decided exactly what you want and even have it written down somewhere, it’ll be much easier to move forward.

 

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