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A financial dream becomes a goal when it is specific

October 02, 1997|By Lynn F. Little

Do you have a financial goal, or is it just a dream?

A dream is vague.

In a few years, "We hope to buy a house." "I want to send my child to college." "I want to be comfortable in retirement." These are dreams, not goals.

A dream becomes a goal when it becomes specific.

It must be written and have beginning and ending dates. In addition, you need to calculate the cost of your specific goals.

"By the year 2000 we will have the $15,000 we need for the down payment on a house." "By the time my child is 18, I will have $20,000 in savings and investments to pay part of her college tuition." "By the time we are 62, our combined income from pension, social security, savings and investments will equal about 80 percent of our preretirement income."

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How do you set goals? Financial goal statements should answer the questions who, what, when, where and why. Practice writing a goal statement using one of your financial goals. Since this is your goal (the who), begin your goal statement with I or We.

State exactly what you will do. Include specific dates (when) in your goal statement. The "where" of your goal statement will indicate where the money will come from to finance your goal, e.g., income, savings or an investment.

Identify why this goal is important to you. This will help you stay focused on your goal.

Keep rewriting the goal until it is specific and achievable. An achievable goal is positive and realistic. It should state what will happen rather than what will not happen. The goal must be within your ability to achieve, within your income and resources.

Once you have determined some specific, achievable goals, list them on a separate sheet of paper. Next, write at least three ways you can reach your goals. Your choice may be to cut or drop expenses, earn more money by working overtime, a second job, a home-based business, or you may choose to invest your money more aggressively. Be ambitious, yet realistic.

Review each of your choices. Think of their advantages and disadvantages. Then choose among them. It maybe necessary to use more than one method to reach your financial goals.

For example, you may cut expenses to save for a new refrigerator. You may decide to invest more aggressively to meet your retirement goal. You may choose to sell an asset to pay a bill and get out of debt.

Try listing some action steps for each goal. What steps do you need to take in order to work toward achieving your financial goals?

Next, determine how much money you need to save to reach all your financial goals. Now put your plan into action and track your progress. Goals and action steps are written on paper, not carved in stone.

If you find your goals are not as realistic as you thought, change them, but don't drop them completely.

The key to financial goal achievement is goal setting. Remember, people don't plan to fail, they fail to plan.

For information on setting financial goals and determining how much savings your family will need to meet their goals, send a self-addressed, stamped (32 cents) envelope to Cooperative Extensive Service, 1260 Maryland Ave., Hagerstown, Md. 21740. Mark the envelope "Goals."

The fact sheet Achieving Financial Goals (FS709) is available by visiting the Cooperative Extension Service office between 8 a.m. and 4:30 p.m. Mondays through Fridays.

Lynn F. Little is an extension educator, family and consumer sciences, Cooperative Extension Service, University of Maryland.

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