Having a clear set of financial goals is a key element to saving enough for retirement. In order to achieve these goals, it is imperative that you first define them and write them down.
Where to start
The first step is to prioritize your financial objectives. Everyone is in a different situation, so ask yourself what your top three financial objectives are and then write them down. Here are some common financial goals and objectives you may want to consider:
- Getting out of debt
- Saving for college for a child
- Building an emergency fund
- Buying a house
- Paying off a house
- Saving for a vacation
Next, determine where you are now. Take time to create a monthly budget. Look at the amount of money being spent and where it’s going and then look at your total income. Track all your income and expenses and stick to it.
If you have any excess income, put it in a liquid savings account as an emergency fund. The rule of thumb is to have between three and six months’ worth of expenses saved up in an emergency fund. This way, when the inevitable financial emergency happens — such as a major car or home repair — you don’t have to put the expense on a credit card and pay high interest rates until you pay it off.
DETERMINING YOUR GOALS
Once you’ve built up an adequate emergency fund and are ready to start investing your excess income, you need to answer some questions in order to allocate your assets properly. The main questions to ask are:
- What is your level of risk tolerance?
- What are your investment objectives and timeframe?
For example, if saving for college is a goal, you know the timeframe is when your child graduates from high school. The longer your investing timeframe, the more risk you are able to take with your investments.
When planning for your financial future, it is important to determine your financial goals, make them specific and measurable, and write them down so you can take action to make them a reality. Like an exercise program, the most important step in achieving financial goals is to just get started.
If you would like a head start on establishing your financial goals, download a Financial Goals Checklist for some examples of ways to help maximize your savings.
Disclaimer: This blog is intended for informational purposes only and should not be construed as individual investment advice. Actual recommendations are provided by Retirement Advisors of America following consultation and are custom-tailored to each investor’s unique needs and circumstances. The information contained herein is from sources believed to be accurate and reliable. However, Retirement Advisors of America accepts no legal responsibility for any errors or omissions. Investments in stocks, bonds, and mutual funds may increase or decrease in value. Past performance is no guarantee of future results. Any of the charts and graphs included in this blog are not recommendations for the purchase and sale of any security.