23 May 2012
Defining and Setting Goals for a Good Financial Life

Before you can start working to achieve your financial goals, you need to define them. Deciding what you want can be challenging, and your goals may change over time. However, to begin the process, let’s start with some general ideas that could define a good financial life.

Some of the long-term goals that people may list include:

  • Owning and living in a nice home
  • Being able to afford travel and to take nice vacations
  • Saving enough to have a financially secure retirement
  • Paying less in income tax
  • Earning more on their investments
  • Being able to afford college educations for their children
  • Having assets that are passed on to their heirs

These are relatively concrete concepts, the costs of which can be determined with a calculator and some assumptions. But there is more to a good financial life than just long-term concrete goals that can be calculated. Short-term and intermediate-term goals should also be taken into account:

  • Being able to afford a comfortable home in a safe neighborhood, whether the home is rented or owned
  • Driving a nice and reliable car
  • Being able to afford gifts for loved ones
  • Taking nice, but not extravagant vacations
  • Accumulating some net worth
  • Getting out of debt
  • Starting the process of saving for retirement and college educations

There are also intangibles that should be considered:

  • A feeling of being in control of your finances
  • Handling finances without too much stress
  • Feeling that you are making progress toward your long term goals
  •  Not worrying about money
  • Not spending too much time and effort handling your finances
  • Knowing you are doing the right things financially and not making mistakes
  • Financial peace of mind

The benefits of patience and time

All of these things can be within your reach, but each of them takes effort. The key is to start early, learn as you go, make fully informed decisions, avoid major mistakes, and balance all your goals.

Learning to manage your finances intelligently can be different from learning most skills. Learning to ride a bicycle is relatively simple – you get on, you balance yourself, you pedal, you turn and brake. There are very few variables. With your finances, there are many variables, and those variables can change over time. You may have different jobs and income levels, you may encounter unexpected expenses, investment markets may fluctuate, and tax rules may change. Some of these changes you can control and others may be beyond your control.

In addition, our minds are not naturally accustomed to thinking about finances the way we need to. We all tend to want immediate gratification and to believe we are in control of all aspects of our lives. Achieving financial goals requires that we make decisions that balance short-term and long-term priorities.

Many tools are available to help you reach your financial goals.  But before you start to map out your journey to success, it’s important to know your ultimate destination.  Spending some time now to decide what’s really important to you can help you decide among all the different options available to you, so you’ll choose correctly at each fork in the road.

 

The information contained herein may not represent the views and opinions of Nevada State Bank or its affiliates.  It is presented for general informational purposes only and does not constitute tax, legal or business advice.

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