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.

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.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022

Recommended

What to Do When You Can’t Pay Holiday Debt
Budgeting

What to Do When You Can’t Pay Holiday Debt

More Americans borrowed money to pay for holiday purchases and now the bill is due. Balance transfer cards offer a reprieve.
January 19, 2022
Is Budgeting Overrated?
Budgeting

Is Budgeting Overrated?

Take it from a financial planner, not everyone needs a budget. In fact, sometimes a budget can distract you from the real solutions to your financial …
January 6, 2022
TOD Accounts Versus Revocable Trusts – Which Is Better?
savings

TOD Accounts Versus Revocable Trusts – Which Is Better?

Both help you pass down assets while avoiding the time and expense of probate, but one comes with a lot more flexibility than the other.
December 2, 2021
Earn 7.12% With Series I Bonds
Basics

Earn 7.12% With Series I Bonds

A savings or money market deposit account is best for quick cash, but I bonds can fit into a longer-term savings plan.
November 29, 2021