November 2008 Topic - Reaching your Financial Goals

01.  Prioritize your goals
02.  Define your goals clearly
03.  Get organized now & Talk about your goals
04.  Saving & Budgeting
05.  Simple steps to Budgeting

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Reaching your Financial Goals

Financial goals are things that you want to acquire but do not currently have the funds available to obtain. Generally, we have two classifications for financial goals, which are short term and long term. Short term goals should be accomplished within a year. Whereas long term are more than one year. Common long term goals are buying a house, sending your child(s) to college or retiring. On the other hand short term examples could include buying a computer, big screen television or a new cell phone.

When figuring out your goals start at the end. I know this does not make sense, so let me continue. You are setting goals for now, yet you must think about what sort of financial situation do you want to be in 15 years? What kind of life style do you want to maintain? Is it important for you to have your mortgage and children's college paid off? As young or middle aged adults we tend to think about now and not the future, but goals that are realistic will be a benefit to your future as well as now.

Regardless of your financial goals you must take steps to reach them. It was once stated "An unwritten goal is only a wish". Like everything in life you must work for it. Unfortunately most of us do not have a lot of money in the bank for any new "toy" or "gadget" we are interested in. There are steps that can be taken to assure that your goal is met within the time frame set.

1. Prioritize your goals

It is important to have goals and work toward achieving them. You will feel better about yourself after completing it. You may want to begin with a short term goal to build confidence. After achieving the short term goal work your way up to an important long term financial goal. In the beginning you'll want to ponder on which goal is most important to accomplish. This may sound like a simple task, however you may find it more challenging than expected. Below are some tips for figuring out your top priorities.

I am sure this will sound familiar, but analyze the saying "do you need it or want it?" As children most of us would agree we disliked this saying very much. As we got older we may have caught ourselves preaching it to our children and grand children. It rings very true especially in today's economy. Many of us are struggling to just pay rents and mortgages no less buy luxuries. So I ask you as adults what exactly is the difference between a need and want? A need is classified as a necessity. Generally speaking food, clothes, heat and shelter are things that someone needs to remain healthy. A want is something you would like, however is not vital to sustaining life. This is all pretty basic, yet do you consider a cell phone a necessity? The answer to many of us is probably yes. We have all become accustomed to basic luxuries such as computers, cable and phones.

No one can decide your financial priorities except you. There needs to be a balance between your wants and needs. Today's generation is a lot different than past generations with technology. Years ago computers and cell phones were not needed in the majority of jobs. Nowadays, many jobs require constant communication. Everyone appreciates luxuries in life. Take into consideration your financial situation when deciding which goals should be achieved first.

2. Define your goals clearly

Be specific with your goals.
Try not to be too broad in describing your goal. For instance, within 2 years I want to buy a 4 bedroom home in a safe centrally located neighborhood for around $300,000. That way you have clarified exactly what your goal is and it is easier to work toward. Keep in mind though how realistic your goal is. There should be many aspects you look at such as income, expenses, and other factors. The point in setting financial goals is to be practical. For a person making $50,000 a year and raising a young family of 5 this goal would not be reasonable. Take into consideration all expenses now and in the future.

Keep track of your progress
Every couple of months re-evaluate the situation and see if you are doing everything in your power to accomplish your goal. Do not be discouraged if in the beginning you feel like your goal is still unreachable. Remember you have given yourself a certain amount of time to get there. It may take a little bit stricter budgeting or picking up some overtime to fulfill your goal.

Putting your goal within your reach
No one said it would be easy reaching your goal. With a few adjustments you may be closer than you think. For instance, let's use our house example. Let's say you want to have a $20,000 down payment. You may want to discuss with your bank about having $500 deducted from your checking account and put into a savings account that yields interest every month.

Why is this your goal?
I urge you to write down the reasons this is the goal you are trying to attain. Such as, I want to buy a home to raise my family and as an investment. This is especially critical when you are working on long term goals. Often times we lose sight of why we are trying to achieve it. You never want a goal to turn into a chore. It should be stated carefully why you are working hard to accomplish it.

Set a timetable.
This method will work with long term and short term goals. There will be numerous steps to succeed. Case in point, in order to save the money for the down payment for the house I will need to research high interest savings accounts to invest money into each month by the end of the week. Once there is a plan with deadlines you will more likely follow through and be successful. You may want to use a day timer or calendar to track your progress and reach your target dates.

3. Get organized now & Talk about your goals

There are different ways to stay organized. It does not need to be pricey or complicated. I will list a few ways below and you decide what is best for you.

Paper records. This is the old fashioned way, however it does work. Do not waste money on a fancy filing cabinet; just invest in an inexpensive expandable filing folder with labels. Put a label on each compartment and each time you receive something put it in the correct area. This will make life much easier when asked for a tax return from 2007 or a pay stub. Here is a tip; label one section personal information which should include your social security card, a copy of your license, birth certificates, passports and any other personal items you deem important. These documents are extremely hard to replace so keep your folder in a safe secure place.

Electronic records. In this generation almost everything is handled through the Internet. There are programs available that are designed just for keeping records and budgeting. I can not stress enough if you are going paperless be sure you have all information backed up in case the computer crashes.

Talk about your goals.

Share your goals with family members and close friends. Unconsciously, by letting other people know your goals you tend to work harder to achieve them. In your mind, you'll not want to let others down; therefore you will be determined to finish what you started. Another benefit to talking about your goals is often times other people have great ideas about saving money and ways to reach your goals.

4. Saving & Budgeting

A major component in reaching your financial goals is going to be saving money and budgeting. Years ago people did not depend on credit and debit cards as much as we do now. We now live in a cashless era. The majority of households have an average of ten credit cards, most of which are at their limit. If you ask the average person how much they made last month they will give you the exact figure. Now ask them how much they spent in that same month or even week and they probably would not even know where to begin. This is the best explanation for the rising household debt in the United States. Though we have covered Budgeting and Saving Money in previous newsletters I will highlight it below.

The envelope system: This is a simple way to save money that can be used for children and adults. Buy a package of white envelopes, and label them with monthly expenses. Obviously, the first couple envelopes will be fixed bills such as car payment, car insurance, rent/mortgage, utilities and so on. These expenses will not change drastically on a monthly basis. The other 3 envelopes are the critical ones. They are miscellaneous, savings, and groceries.

Each month you are going to put the amount of money that you spend in each envelope. As an example, in the grocery envelope you will put $200. You are going to take only that envelope to the store with you every time you shop. Leave credit cards and extra cash at home. I guarantee you that you will have money left over at the end of your shopping trip. Some of you are shaking your heads no and wondering how.

Let me tell you our minds work very well with this. You are shopping and know that you only have a certain amount of money; therefore without realizing it you will only buy the necessities. The last thing anyone wants to do is get to the register and not have enough money. Once you finish shopping and have extra money left over put it in the savings envelope. This is the best way to start slow and save money. Once you have become accustomed to this you will no longer need the envelopes. I urge all of you to try it for just 2 months.

Basic Budgeting: The best way to budget is to stop using credit cards for daily purchases. The huge downfall to credit cards is loss of control. You are not able to keep tabs on how much is spent. It is much easier to swipe the card than actually use cash. You do not realize the damage you have done until you receive the bill from the credit card company. On top of what you actually spent there is a finance charge that is added to the balance every month. This makes it very difficult to maintain a budget.

Budgeting is very important because it lets you prepare for the future as well as the present. This tool allows you to see firsthand if you are spending too much money and where exactly to cut expenses. It is also a great way to prepare for unanticipated events that may occur. Most importantly, you will have a sense of control over finances and that is priceless.

5. Simple steps to Budgeting

Get organized:
Just like with the envelope system you will have fixed expenses. However, the goal to getting organized is to see where those dollars days go daily.

Putting your goal within your reach
. No one said it would be easy reaching your goal. With a few adjustments you may be closer than you think. For instance, let's use our house example. Let's say you want to have a $20,000 down payment. You may want to discuss with your bank about having $500 deducted from your checking account and put into a savings account that yields interest every month.

Calculate your debt to income ratio:
Take your total monthly income after taxes and write that number down and put it the side. Next, take your bills for the last couple of months and average them out to get an estimate of expenses on a monthly basis. Add up both totals and subtract expenses from your income. If you have money left over, than you have savings. If there is no surplus of money consider yourself adding to your debt. The goal is you have more coming in than going out.

This is where your financial goals come into play. At this point you may have come to the realization that you are like most Americans and have a high debt to income ratio. In simple terms there is not much money to save at the end of month or even day for that matter. This is where budgeting comes in to help you succeed in fulfilling your financial goals.

Write everything down:
Once you have come to the realization that you do need to change your spending habits. Than start recording every penny you spend. It could be the pack of gum you bought for your child or the coffee on your way to work. Do not attempt to do this from memory because you will forget something. Remember those small purchases add up to a lot of money monthly.

The shock sets in:
After writing this all down for a few weeks, you can begin to realize you're spending too much money on nothing. That is good because now you can stop. In my business I learned a very important lesson, which is you cannot change people's spending habits on certain things. As an example, I once had a woman who had no money at the end of the month. We reviewed her budget and realized that she buys only organic food for her dog.

It seemed like common sense to me as a financial counselor to feed the dog nonorganic food and save over $100 a month. Well let's just say I was proven very wrong. That was not an option for her, so instead we cut other expenses in her budget. Regardless of your priorities there are always ways to cut expenses and keep everyone happy, including the dog.

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Got a question? Then contact our Education Team on 561-883-2398 Ex.310 United conducts regular seminars on financial education, including "How to Budget", come along and join us! To reserve your seat contact our Education Team on 561-883-2398 Ex.310

Newsletter 11
Rev.1
November, 2008