How To Set Goals For Creating Financial Priorities

What Is The Best Way To Grow Your Debt Payment FundDid you know that creating a budget doesn’t start by creating a budget? Good budgets start with goals. Why is this? It’s because budgeting for the sake of budgeting rarely works. You need to have goals so you will know why you’re budgeting and can see you’re making progress towards achieving them. Plus, goals help you create your financial priorities. In fact, if you don’t create goals before you make a budget, it’s almost guaranteed that you will fail. So how do you set goals for creating your financial priorities?

Identify your goals

You may not be able to achieve every one of your goals. But you do need to identify them and then decide which ones are most important to you. If you concentrate your efforts on those goals that are most critical you will have a much better chance of achieving them.

Focus on your most critical goals

Make sure you’re focusing on your most important goals and put your secondary goals on the back burner. You might want to spend a year circling the globe in a sailboat but this might take second fiddle to saving for a good retirement.

Be ready to resolve conflicts

You may find that some of your most worthwhile goals conflict with one another. If you find that you’re facing such a conflict, there are two questions you can ask yourself. The first is which of these goals will benefit more people. The second is which one would cause the most harm if I defer it.

Use time wisely

The most important component in realizing your goals is time. In a savings account, a certificate of deposit or if you invest in stocks or a mutual fund, the more time you have the more your money will grow due to compounding interest. To put this another way, if you are young you will have more time to build your retirement nest egg and can invest differently than older people who are closer to retirement.

Choose your goals carefully

When you create your list of goals, look for things that will make you feel happy, fulfilled or financially secure. These could be things such as creating an emergency fund, paying for your kids’ college education or getting out of debt. After you have listed your goals, try to rank them in order of their importance,

Get family members involvedmother, father and daughter

If you have a significant other or spouse, be sure to get him or her involved in your goal setting. It’s practically impossible to fulfill goals that involve your spouse or significant other if they don’t agree with them. You might also consider including your children if they play a place in your goals.

Begin now

The more time you let the lapse before you begin working on your goals, the tougher it will be to achieve them. For instance, if one of your goals is a nice retirement, the longer you put off saving for it the more money you will lose in compounded interest.

Don’t worry about the small stuff

The fact is, most of our living is done in the here-and-now. It’s what we spend daily including things we do just for fun. Don’t sweat these as long as you’re continuing to work on your long-range plans.

Do worry about the big stuff

Now that you have a list of your goals, you need to keep your spending on track with them. Any time you’re about to spend money on a big-ticket item, ask yourself “will this get me closer to my primary goals.” If not, try to either defer or reduce it. You might want to take a 10-day vacation in Hawaii but if that steals money from your kids’ college education you might want to ditch that for a long weekend at the beach.

Be flexible

Finally, you need to be flexible as you age and your needs and desires change. In fact, it’s a good idea to get out that list of goals every five years and review them. The goal of buying a sailboat might have made sense when you were 30 but now that you’re 40, it just might not seem as important vs. some of your other goals.

Be aware of the myths of goal setting

There are myths about goal setting you should be aware of and here’s a brief video explaining five that could get in your way of setting goals.

Tips for investing your money

Regardless of what your goals might be, they will need financing. Here are some tips for investing in stocks that could help you accomplish some of your goals.

  • Understand that stocks are not just pieces of paper. When you buy a stock you’re taking ownership in the company. Make sure you understand the company, it’s leadership and history of success before you buy ownership in it.
  • Know that there are many different kinds of stocks. There are large- and small-cap stocks and sectors stocks such as energy stocks, retail stocks and technology stocks. Before you invest, learn the differences between stocks so you will know which ones might make the best sense for you and your goals.
  • Learn that stock prices follow earnings. It’s unfortunate but true that in the short term, the prices of stocks tend to fluctuate based on things such as fear, rumors, enthusiasm and news. However, in the long run they follow earnings. In other words, how much a company earns over the years will determine how much its stock increases or decreases.
  • Remember that Stocks are your best bet. If you want to earn a return above and beyond the rate of inflation, stocks are your best investment. While stocks have gone up and down since World War II, the average stock has returned close to 10%, which is well ahead of inflation as well as the returns on other investment options such as real estate and bonds.
  • Understand that a great history does not guarantee a great future. The prices of stocks are based of what companies will earn in the future. Even stocks that have great track records can fall.
  • Know that the best portfolio of stocks for growth over the long term will include those from different industries. That way, if one area of the economy such as electronics goes sour, you may be able to make up the shortfall because energy stocks have gone up in value. In other words, diversity is critical.