Though it is human nature to wish it were so, achieving your various financial hopes and dreams isn’t a one-size-fits-all proposition. Each goal—whether short- or long-term, large or small—must be granted its own consideration if you want to build a truly effective strategy.
It doesn’t have to be—especially if you put the following three simple tips into practice.
Identify Your Goals
Do you want to retire early? Buy a home? Remodel your kitchen? Purchase each of your children a car when they reach driving age? Plot an around-the-world adventure for your golden years?
Whatever it is that you hope to accomplish, name it. Show each unique, individual dream the respect of acknowledging it in the physical world. Write it down on paper or in your online budgeting system.
Why? Because if you don’t identify your goals, you’re unlikely to reach them. It’s as simple as that.
And now that you’ve taken the time to think seriously about what you really want out of life and gotten as specific about the components of that life as possible, the next step will likely not only be easier, but also potentially more fruitful.
Where do you see yourself—both personally and financially—in one year? How about five? Or ten?
Organizing your goals according to basic timeframes to help you plan ahead and prioritize in efficient, potent and mutually beneficial ways.
For instance, if you’re graduating college or starting your career, your savings goals may include buying a car or paying for a wedding or honeymoon. As you settle into your career, you may aim to buy a home. If you’re expecting a baby, you may start saving toward your child’s education. Utilize resources that can help you chart the path towards achieving these goals, such as calculators and advice from experts.
And throughout all these stages, retirement savings should, of course, remain an ongoing priority.
Create a Plan
One of the first and most important steps to setting and meeting financial goals is to develop a budget or spending plan.
A good rule of thumb is to devote no more than 50 percent of your income to necessities—such as housing, food, utilities and other bills. Dedicate 30 percent of your budget to non-necessities such as new clothes, travel, dining out and entertainment. The remaining 20 percent should go toward your savings goals.
If, on the other hand, you have multiple savings goals or are looking to check one off your list faster, consider cutting back on the non-necessity portion of the budget. Rather than spending 30 percent of your income on your “wants,” try to cut that back and apply all those extra dollars to your goal. You’ll be surprised how quickly an extra fifteen or twenty percent of your income compounds after a few months.
Remember, however, that your savings goals—and, indeed, financial circumstances—may shift and evolve over time.
When that happens, simply adjust your goals and timelines accordingly. Life, after all, is full of surprises. Maybe the baby you’d planned to have in five years is coming a few years sooner. Or perhaps you've decided that your child should attend a private high school and need to use some of those college savings earlier than planned. Or you decide to retire early. Who knows?
Be flexible and reexamine your plans regularly to ensure life is on the trajectory you want it to be in that moment.
Finally, as you design a plan to meet your short- and long-term goals, the counsel and perspective of a seasoned investment professional can be invaluable in helping you map out strategies that will allow you to meet your everyday financial commitments while saving for your optimal future.
To learn more about how to begin making tomorrow’s dreams a reality today, subscribe to our newsletter. Or if you’re ready to get help plotting a specific course of action to meet your goals, please contact a Fifth Third investment advisor near you.