3 Steps to Identify Your Financial Goals

Every individual and family is different in terms of their expectations and aspirations for retirement. You may have been planning for years to finance a child or grandchild’s education, or to purchase your dream vacation home. But whatever you have in mind, in order to assess your own financial progress and plan for the future, you need to identify your financial goals.

The following steps will help pinpoint what you want your money to do for you tomorrow and what you need to do today to make it happen. (For more, see: Setting Financial Goals for Your Future.)

1. Ask Yourself What Really Matters

Financial goals stem from life goals, so ask yourself what matters the most to you personally. These questions are a good place to start:

  • What brings joy and purpose to your life?
  • Are there any concerns to be addressed?
  • What makes you feel in control, confident and peaceful?

Giving thought to these questions and discussing your answers with your team of trusted advisors will help them help you to zero in on your goals, understand the role your finances play in achieving them and develop a strategy for getting there.

2. Consider the Short and Long Terms

Balancing a mix of short and long-term goals is one of the main functions of a good financial plan. You may want to achieve debt-free status within the next two years, take an international vacation in the next five, and retire in the next 20. Additionally, if you have a family, caring for them is likely an important element of your plans for years to come. Establishing a timeline will enable you and your advisor to structure your investments and spending so that you achieve the short-term items on your list without compromising the ones that take longer-term planning.

3. Map Out Your Financial Past, Present and Future

The first step in painting a clear financial picture is gathering the important information about your money. From there, your advisor can help you chart a course that will help you get where you need and want to go financially. To chart a course for the future, you need to evaluate your financial past and present. At the Society of the FEW (Financially Empowered Women), we organize this information using three key documents we call The True Retirement Experience™. (For more, see: The Complete Guide to Calculating Your Net Worth.)

  • Past: Net Worth Statement. Your net worth statement captures the value of all of your assets, from your home and car to your bank and investment accounts. It also includes liabilities such as debt from loans or credit cards. The net worth statement reflects the financial value of everything that you have earned, saved and acquired up to this point.
  • Present: Income Statement. Your income statement lists all of your sources of income and your expenses on an annual basis. It provides a snapshot of the here and now to help you understand where your money is coming from and where it’s going. Coupled with the net worth statement, the income statement is the foundation for creating your financial plan.
  • Future: The Financial Plan. The third and final document is the most comprehensive and forward-looking: the financial plan. It’s a detailed financial plan developed with an advisor that compiles your past, present and goals into a roadmap for the future. In addition to managing your investments and developing a budget, your advisor can also use financial modeling to project for factors like inflation and “what if” situations. For example, “what if my child chooses to attend an expensive private college instead of a state school?” or “what if a market downturn happens the year before I plan to retire?” Examining cause and effect scenarios will likely illuminate both concerns and opportunities that you may not have considered before. With an eye toward the future, your advisor can help you prepare effectively for a range of financial challenges and goals.

The outcome of all this information gathering, reflecting and projecting is a financial plan that, when followed, will result in achieving the goals you set for you and your family. It affords you the peace of mind that comes with knowing you are financially on track without having to worry about whether the decisions you make now will negatively impact your future. (For more from this author, see: How to Transfer Wealth and Values to Heirs.)