Just as “leadership” has become a buzzword in corporate management, so too has the concept of “financial goal-setting” in finance. Seeing the way some firms market themselves, there is a lot of misinformation on what makes a good financial goal.
Simply saying, “I want to retire,” doesn’t meet the criteria of a good financial goal. Chances are, you can retire today if you so desire, but the income you would be forced to live on may not meet your minimum standard of living. How can we improve this goal? By adding information, we can specify our minimum requirements. “I want to retire in 10 years with a monthly income of $8,000 in today’s dollars.” This gives us a far better idea on when we’ve crossed the finish line.
· Specific – Identify the dollar amount you need as income
· Measurable – you can gauge whether you’ve hit your goal by using dollars to measure
· Attainable –your goal should reflect your time horizon and your risk tolerance
· Relevant – your goal should carry personal weight to you
· Time bound – you should have a deadline to measure your progress
Retirement isn’t the only worthy goal
Once they have set a retirement goal, many couple’s think they are finished goal setting, but retirement isn’t the only goal worthy of our efforts. Many people don’t realize that there are several financial goals worth setting. Below are some often forgotten goals:
· Providing assistance for children or grandchildren to go to college or private school.
· Leaving an inheritance for children.
· Paying off debts (student loans, car loans, mortgages).
· Generating passive income from investments.
· Planning a large purchase (home, cottage, business).
There are as many other worthy financial goals as there are people who set them. The challenge is how to make consistent meaningful progress towards them. Your financial advisor should be your chief accountability partner in pursuing these objectives. If you would like to explore setting financial goals for yourself, or staying on target, we can help.
Geoffrey Sadek, CFP®
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.