Twenty-Five Years of Financial Insights(Part 15: Ten Timeless Tips for Financial Goal-Setting)


Well, 2018 is already rolling along at a rapid rate. Can you say the same about your New Year’s resolutions?

What’s that, you didn’t make any? That’s okay! You don’t have to set New Year’s resolutions, but my 25-plus years of experience has taught me that you stand the best odds for achieving your goals if: (1) you’re mindful about setting them at some point, (2) you write them down and assign a desired deadline, and (3) you regularly review how you’re doing.

Financial goals are no different from any others: Write them down, assign timelines and revisit them regularly. That hasn’t changed. I’ve noticed that key financial goals themselves haven’t changed much either over the years. Long before blogs were a thing, I read a great article about 10 important financial goals most people should set. Decades have passed, but those 10 topics remain as relevant as ever. Let’s revisit them, for the sake of auld lang syne.

  1. Retirement. Probably the #1 one goal if you’re not yet retired is to prepare for when and how you’d like to retire, or at least be financially independent. Write down a target year and an income level (in today’s dollars, after-tax indexed to inflation). This doesn’t mean you can’t change your mind, but it gives you a starting point to revisit regularly.
  2. Debt reduction. Whether it’s a mortgage, credit or investment loans, most of us incur debt, but you’re usually best served if you can pay it off before you retire. My experience has shown me that those who retire with debt are more likely to struggle financially.
  3. Saving and investing. While it’s nice if you inherit wealth or your business pays off for you, most people have to accumulate wealth the old-fashioned way: setting aside savings and investing it for the long run. In case that lucky break never happens, pick a percent of your pretax income (typically north of 10%) and have it auto-deposited into a savings or investment account before it even hits your discretionary checking account.
  4. Education. After you’ve set up retirement, debt reduction and saving/investing plans, there’s your children’s or grandchildren’s education. The math is relatively straightforward: Your savings goal is determined by how many years and what percentage of expenses you are willing and able to cover. Set clear, realistic expectations so everyone can plan accordingly, and take care to avoid sacrificing your own financial stability.
  5. Charity. What are your charitable goals? Establish an annual amount you’d like to give, and try to remain within that range.
  6. Discretionary spending. What big purchases would you like to make? Whether it’s renovating your home, buying a new car, or acquiring vacation property, put down some dollar figures and desired dates, lest your greatest goals remain elusive dreams.
  7. Leisure time. How much after-tax money will you spend on travel or other favorite activities? As with your charitable intent, assign an annual budget for fun. Be sure to spend it – and savor it as money well spent! But also be careful not to blow past your annual goal.
  8. Emergencies. Emergencies happen too. Instead of having to take on debt to cover them, it can be an enormous relief to have rainy-day funds in reserve. Depending on your personal comfort levels, consider setting aside enough to cover one to six months of expenses for when (not if!) an emergency expense arises.
  9. Insurance. It’s great to have plans, goals, budgets and emergency funds, but what if you become debilitated or worse, and your family needs ongoing financial help?  Do you have a plan in place? If you already have insurance, when’s the last time you reviewed it? A periodic insurance check-up ensures your coverage remains relevant over time.
  10. Estate planning. Bottom line, you can deliberately plan for how much you would like to leave your family, charity or other beneficiaries (perhaps as a percentage), or you can leave it to the government to take care of that for you, after taxes. Guess which approach is more likely to reflect your personal intents?

So there you have it. Ten timeless financial goals that remain top of mind today. Fortunately, with mobile devices, it’s easier than ever to track your goals and stick to plan. For my own planning, I keep a list on my iPhone. Then, whenever I have any down time – waiting at the doctor’s office, getting my tires changed, etc. – I revisit my list to see where I’m on track and where I may need to step up my game. With this sort of ongoing, ad hoc planning, you might be amazed by how many resolutions you manage to achieve, this and every year.

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