Friday Financial – Financial Goals
Last time we discussed values, now we’re going to explore how those values lead us to make goals and how to make financial goals.
There is no end of craving. Hence contentment alone is the best way to happiness. Therefore, acquire contentment.
Let’s be honest, we all crave something we cannot afford. I’d love a car that was less than 15 years old! Someday I’ll get there, but not right now. There are many things we can desire to have, but learning to be patient and wait for them is important as well. Our values can help us decide to choose one thing over another. They can also help us decide on our future purchases or savings habits.
A good financial goal includes 4 items:
- A description – what is your goal. Make it realistic – don’t set yourself up for failure!
- A Target Date –
-Short term goals are within a year
-Intermediate goals are from 1-5 years
-Long term goals are beyond 5 years (think retirement)
- A Plan – how am I going to get (my goal) by (date) considering the (cost).
-How much will we need to save each month?
-What account needs to be set up (savings, 401K, etc.)
I’m going to take my example of my car that will be younger than 10 years. I would love to have a brand new car, but that may not be practical. I’m going to say I want my new(er) car in 4 years. This is an intermediate goal.
For the model I am considering the cost will be from 13,700 to 19,900 – depending on which year I buy – 2006-2010 – I’ll be buying in 2015 so anything before 2006 is out! Of course if I want a car younger than 10 years for a longer time I will have to pay more money up front. I’m going to go inbetween the two and say I’ll buy it for 16,800.
If I were to buy it without taking out a loan, I’d have to save 5,600 each year for 3 years. There are several ways I could go about doing this. I could save 466 each month. I could say I was going to save 1600 from my tax return each year (not necessarily going to happen, depending on income and such.) If I did that my monthly savings would only have to be 333.
If I decided that I would take out a loan, then I’d need to decided how much of a loan I’d want to take on. I could say I was going to take out a loan for 1/4 of the cost of the car and pay 75% of it out of pocket. Then I’d only have to save 12,600, or 4200 each year (350 per month.) That would be a typical car payment anyway, so I’d know if I could afford buying a car in case mine died before 3 years were over. Unfortunately having a car is a must in a rural area where I need to drive miles every week (and there is not a very friendly bus system – it’s new and only has 1 route!) In this scenario I decide on this option and save 350 per month in a separate savings account. After a year I will put the 4200 in a CD for 2 years to earn more interest. After the second year I’ll put that years 4200 in a CD for 1 year. The separate savings account and CD will help me not spend the money! After the end of the 3 years the two CD’s will end and I’ll have all the money I saved plus interest.
Unfortunately this is just a scenario so I cannot track it with you, why? We just bought our house and until things get settled down from that we’re not taking on any other goals. It’s how we do things. We do have a lot of short term goals that pertain to our house… such as getting our outlets grounded and adding insulation.
Your assignment today – I want you to sit down and write what financial success means to you. Does it mean that you can retire at age 50? Or does it mean that you will be able to have a house paid off and help your children through college? Or does it mean that all your credit card and student loan debt will be paid off? Each of us views success differently so we each will come up with a different view of success.
The experiences in my life in the past few years have led me to determine that financial success to me is that I’ll have enough money to pay all the bills AND save for future uncertainty in addition to being able to buy occasional wants.
Also don’t forget to continue tracking your spending!