Step 1: Identify Your Financial Goals
Every financial plan should include savings and investment goals. By establishing goals, you have something to work towards which can help keep you focused.
It is recommended that you target at least 10 percent to 15 percent of your net income to save and invest each month. Generally, the best way to achieve
this goal is to pay yourself first by setting up an automatic withdrawal that goes directly from your paycheck to a savings or investment account each
pay period.
It may be helpful to categorize your financial goals into time periods:
- Short-term
3 years or less
- Intermediate-term 4–6
years
- Long-term
7 years or more
The following chart is an example that lists some common goals, time frames, amount needed and monthly contribution.
| Financial Goal |
Time
Frame |
Amount |
Monthly Contribution |
| Note:
This example assumes that the credit card is charging 15 percent interest, the
savings invested for the down payment over 5 years, and for the child’s
education over 12 years, are each earning 5 percent annually and that the
savings invested for retirement over 30 years is earning 7 percent. |
| Pay full credit card balance |
12 months |
$ 2,000 |
$180 |
| Save for down payment on home |
5 years |
$ 20,000 |
$295 |
| Save for child’s education |
12 years |
$50,000 |
$225 |
| Save for retirement |
30 years |
$300,000 |
$250 |
| Total Per Month |
$950 |
Use the Financial Goals Work
Sheet to list your financial goals that will require
resources beyond what you will be able to provide from your
current income. When you complete this work sheet, you are
ready to proceed to Step 2.
Step 2: Calculate Your Net Worth
Once you have established
your financial goals, the next step is to
determine the resources you
will need to help you achieve
those goals.
Use the
Personal Financial Statement to calculate your net
worth — the value of everything
you own minus the value of
everything you owe. Use actual market
values — what your
property would be worth today if
you decided to sell it and what your
loans would cost you today if
you decided to pay them in full.
|
Basic Money Management
Basic Money Management
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