Advertisement
Budgeting

Set Your Goals

If you have trouble sorting your goals out, try classifying them as either wants of needs.

The most important step toward financial security is to translate it into your own terms. What, exactly, are your personal financial goals? If you have trouble sorting them out, try classifying them as either wants or needs. Go a step further and add long-term or short-term to the description. Now you have some useful labels you can apply to your priorities.

Advertisement - Article continues below

Say you're going to need a new car soon. Gathering the money for a down payment without borrowing or dipping into savings would be a short-term need. Let's call it, and other short-term needs such as your daughter's braces or a new winter coat, priority number one.

Longer-term needs, such as contributions to a retirement fund, can get priority two. That vacation in Bermuda next spring is a short-term want -- priority three. The 42-foot sailboat you'd like to own before too many years go by is a long-term want, so it gets a four.

You could shift priorities around, of course, and use lots more numbers. Actual goals and their priorities will vary with your circumstances. The important thing is to give serious thought to your goals and try to anticipate the expenses coming up, whether they're close at hand or several years away.

Choose goals you can get excited about, because that will make you more determined to reach them. "Financial security" sounds good, for instance, but it's hard to quantify. It needs some skin and bones. Define what it means to you. How about this? "I want to own a million dollars' worth of stocks by the time I'm 50." Or this: "We want to retire to Arizona in ten years with enough money to buy a house near Phoenix and enough income to travel in Europe for a month each year." Now you've got goals you can put a future price on, and that price can be translated into a savings and investment plan that you can start today. Put your goals in writing; that makes for a great motivational tool.

The trouble is, exciting goals and good intentions need cash to back them up. That's where budgeting comes in. It's your best bet for distributing your limited resources among competing goals.

Advertisement
Advertisement

Most Popular

Turning 60 in 2020? Expect Lower Social Security Benefits
Coronavirus and Your Money

Turning 60 in 2020? Expect Lower Social Security Benefits

When you file for Social Security, the amount you receive may be lower.
July 30, 2020
These 2 Words Could Send Your Retirement Money to the Wrong Beneficiary
estate planning

These 2 Words Could Send Your Retirement Money to the Wrong Beneficiary

"Per stirpes" vs. "per capita." Making the wrong choice could cause an estate planning disaster.
July 30, 2020
Second Stimulus Check Update: HEALS Act vs. CARES Act
taxes

Second Stimulus Check Update: HEALS Act vs. CARES Act

When compared to first-round payments, the new Republican stimulus check proposal expands and protects payments for some people, but it shuts the door…
July 29, 2020

Recommended

How to Navigate Emergency Funds in Urgent Times
savings

How to Navigate Emergency Funds in Urgent Times

COVID-19 has revealed cracks in many people’s financial plans, and emergency funds have never been more important.
July 12, 2020
Find the Best Money Market for You
money market accounts

Find the Best Money Market for You

Whether you choose a money market fund or account largely depends on the money's purpose.
June 24, 2020
A View of Life After the Pandemic
savings

A View of Life After the Pandemic

Among the forecasts: The work-from-home trend will last, and we’ll welcome more robots.
June 5, 2020
Lessons for Kids From the Crisis
savings

Lessons for Kids From the Crisis

One of the greatest opportunities presented by the pandemic is to give children an appreciation for the workings of the economy.
June 5, 2020