Allen Wohlwend, a CPA and certified financial planner in St. Petersburg, Fla., offers a variety of services to his clients. Some need help with their taxes, others want assistance with retirement funds and many need to sort out their overall financial picture.
There’s a common thread – what is your financial goal?
“For anybody who walks through the door, if they don’t have some financial goals, if they have failed to plan, it’s like the saying goes, they are probably planning to fail,’’ Wohlwend said. “The ones who look ahead and have some concept about what they’re looking to do with their money, the ones who put a plan into motion and establish some good habits, those people are golden.’’
Accordingly, there are golden rules.
The rules aren’t iron-clad, though. Carl Richards, a certified financial planner in Park City, Utah, calls them “guesses.’’ Who knows what’s ahead in 30 years? For that matter, who knows what’s ahead next week? So the smartest, best-prepared people make the best guesses possible.
“When I was studying to become a certified financial planner, the so-called (money) ‘number’ was very important,’’ Wohlwend said. “That was the number we’ve got to get to when we’re 65 to provide us with the lifestyle we want for the rest of our lives. That was a long time ago.
“But what if there’s an economic downturn? What if circumstances change? It’s not just the number that matters in setting your financial goals. It’s the process itself. It’s establishing good habits. If you adhere to consistent saving patterns, you’ve set yourself up for success.’’
According to the 2016 National Financial Capability Study released by the FINRA Education Foundation, there are mixed results among American consumers. The poll of more than 27,000 adults revealed an increasing number of consumers have set aside money for a three-month emergency fund (46% compared to 40% in 2012). But only 39% have tried to figure out how much they must save for retirement, while 56% worry about running out of money in retirement.
Meanwhile, 40% say they spend less than their income, 38% spend about equal to their income and 18% spend more than their income — figures that have remained flat since FINRA released its initial study in 2009.
“The bottom line is everyone can do more — and everyone should do more — to plan for their financial future,’’ said Annamaria Lusardi, a George Washington University professor who is one of the world’s foremost experts on debt management. “Make a plan, then follow that plan.’’
An outline for anyone’s fundamental plan should include:
The best way to reach your financial goals is by making a plan that prioritizes your goals.
When you examine your own goals, you’ll discover that some are broad and far-reaching, while others are narrow in scope. Your goals can be separated into three categories of time:
The goal-setting process involves deciding what goals you intend to reach; estimating the amount of money needed and other resources required; and planning how long you expect to take to reach each of your goals.
Developing a financial goals chart is a good way to begin this process. Here are the five steps you should follow in order to set up your goal chart:
All of that might sound daunting, but it’s best to set incremental goals. Prioritize, then achieve. After accomplishing some of the easier goals, you gain confidence in your decision making That provides motivation to achieve the more difficult targets that require more time and discipline.
There are resources to help everyone stay on course. Financial apps for goal tracking can be helpful. Technology offers a number of goal ticklers, alerts and prompts that can provide a nice road map.
There are also old-fashioned methods. A picture of yourself affixed to the refrigerator door, perhaps simulating that enjoyment of retirement on a secluded beach, might make for a nice visual stimulus.
“If you see it, you believe it,’’ Wohlwend said. “It’s like getting out that old picture of yourself from college, showing what you used to look like. That can help you get motivated to lose those 30 pounds. Whatever the method, if it puts you on the right track, it’s worth it.’’
When the scale finally tips in your favor, it’s only human to seek a reward, such as some chocolate cake. That’s true in the world of finance, too. When you achieve your money goals — either through incremental progress or the retirement finish line — there’s nothing wrong with celebrating a job well done.
Kieffer, C., Lusardi, A., Mottola, G., Walsh, G., (2016), National Financial Capability Study, FINRA Education Foundation. Retrieved from http://www.usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf
Hayes, A., (4 September, 2015), Eight Ways to Increase Your Income Without Going Back to School. Retrieved from http://www.doughroller.net/careers/8-ways-to-increase-your-income-without-going-back-to-school/
Richards, C., (29 October, 2012), Six Tips for Setting Your Financial Goals, The New York Times. Retrieved from http://bucks.blogs.nytimes.com/2012/10/29/six-tips-for-setting-your-financial-goals/?_r=0