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A SMARTer Way to Create Realistic Financial Goals

| March 06, 2018
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We all have financial aspirations—whether you want to purchase a vacation home, travel the world, or pay for your child’s college education, you must do a bit of planning before those dreams can become reality. It is important to take the time to carefully consider potential paths to accomplish each of your financial goals, so you can see which goals are most realistic, and how each of them affects your overall financial roadmap.

These tips can help you to jump start your financial goal setting.

Make your goals SMART

When creating your goals, categorize them as short, medium, and long-term. Short-term goals should be achieved within the next few years, medium-term goals may be about five years in the future, and long-term goals may be 10 years or more down the road. Examples include saving for college, purchasing a home, investing for retirement, or saving for an extended vacation.

When defining your financial goals, using the SMART method can be useful. SMART goals should be specific, measurable, achievable, relevant, and time-bound. For example, say you want to take a two-month trip. The SMART method will help you narrow down key information that will affect your financial approach to the trip:

Specific – Where exactly do you want to go?

Measurable – How much will it cost to travel to that location and pay for lodging, food, and other activities?

Achievable – Is this vacation attainable with your current financial situation and other goals?

Relevant – Does this vacation make you a happier person, and is this the right time to plan it?

Time-bound – When do you want to take the vacation? How long does that give you to set aside funds?

The SMART exercise is a great way to determine if your goals are realistic. When all of the information is laid out, does your initial thought process still make sense?

Prioritize your goals

Once you identify your goals, list them in order of importance. By definition, short-term goals are right around the corner, so a conservative approach might be practical for those. You likely have more time to integrate medium- and long-term goals into your overall financial plan.

Meet with your financial planner to discuss appropriate investments and assumptions that fit within your risk profile. They can act as a valuable partner to help you prioritize and work toward your goals, whether they are this year or 20 years in the future.

Create a plan and stick to it

Now that you’ve defined your goals, it’s time to start working toward them! Stick to your monthly savings goal for that vacation, or work with your financial planner to craft an investment strategy for retirement. Check in monthly to see the progress you’ve made toward each goal.

Review your plan as your goals evolve

As the years pass, your goals may change due to a new job, a promotion, a new baby, or numerous other factors, and you will need to establish new goals as you achieve the ones you set five years before. Review your plan quarterly or semi-annually with your financial planner to ensure that your personal and professional interests and your finances are in sync. If you’re not on track, refine and adjust.

Creating goals can be challenging. Your financial planner likely has a lot of experience assisting people with goal setting and can act as a valuable partner in the process. They can help you remain accountable and suggest new plans of action to help you work toward your goals.

Learn more about our financial planning services here.

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