From the TGIF 2 Minutes Archives earlier this year PRE-coronavirus…
Earlier this year in February things were GOOD! The economy was cranking, unemployment was low, wages were up, and it was a somewhat perfect time of the year to set goals. Think: it was pre-tax filing time and after the holidays.
Fast forward to today… the world has changed. Our savings have been tapped in the pandemic — and new savings and other goals need to be reset! While the kids may now be going back to school (followed by maybe not??) using this precious time to set just a handful of goals can pay off toward achieving those goals.
Use the following to create momentum with identifying goals:
**START WITH UNDERSTANDING HOW MUCH YOU SPEND TODAY.
- This is a loaded question but simply identifying the “big nuts” of spending – the obvious mortgage/rent, insurance, car expenses, groceries, eating out, cable & internet, clothes, and entertainment. Know these – and then round UP. Bang! You already have identified more than most people are willing to admit.
Then start thinking in terms of categories: Work, Fun, Family.
- How much are you making today (after taxes)?
- Do you need or want to get a higher educational degree to progress beyond where you are now? What would that cost? How can you finance it or get your employer to pay for it?
- Do you want to start your own business? How much would that take to start? Have you identified a potential business partner?
Fun and Family (has changed slightly in the present- think FUTURE)
- How often would you like to travel? Emphasis on “like to”. This is simply goal setting; start with what you want or dream about, then see about trying to make it happen.
- How much have you spent on travel in the past several years? Use this as a benchmark and adjust up or down, for the future.
- How much do you spend on gifts for family and friends? Do you wish it were more? Take a look at just the most recent year and how much you spent on gifts.
- How much do you have saved TODAY in an emergency or rainy-day fund? Is it enough for 6-9 months of expenses?
- Separately, how much do you have saved in a “slush fund” (different from emergency fund) for fun or travel or …whatever?
- How much do you currently save monthly for retirement? Whether retirement is in the near future or 30+ years from now. What is the current balance of your various retirement accounts?
- Visualize 3, 5, 10 years from today, financially. What does that look like? For help, try this –
- Based on what you spend today (key point from above**) what do you think you will spend your money on in future years? New things? Some of the same things? What will move up in importance and preference? (Forget about inflation for now; in a future exercise inflation will matter more.)
- Interest rates and investment return. Do you know how much your investments returned the past several years?
- Taxes. Do you know how much you pay in taxes each year? Taxes can determine what types of investments make sense for your future – even your distant future.
Research says that there is not enough conversation around achieving financial goals. Part of the reason may be that setting realistic financial goals is often so difficult! Several of the points above may seem obvious. But actually sitting down – in a low-pressure environment – and thinking through these simple points while taking notes can go a long way to creating needed momentum. Then, adding advice – investment and tax advice – to the equation can make achieving goals a reality. Give yourself a “Goals Gut Check” with this precious time before things potentially go a little haywire.
Stay tuned next week for why goals are so necessary and urgent (hint: taxes).