Finance: Don’t leave your financial goals to chance

By Janet R. Beal, certified financial planner, Winner Lynk Advising Group, Hiawatha

When it comes to setting financial goals and figuring out how you're going to reach them, you can't leave it to happenstance. By definition, a goal has a deadline, and to reach it you need a strategy - you have to do certain things, in a certain order, by a certain date.

Whether your goal is to save enough money to put your children through college, fund a comfortable retirement, or purchase the vacation home you've always dreamed of, it will take time and planning to meet these goals.

“I don't have time,” you say. Besides, “I don't know where to start.”

Perhaps the following can help. Follow the three steps below:

IDENTIFY YOUR NEEDS

List your goals and the time frame in which you wish to reach them. This is an easy but necessary part of the process.

Investing is like planning a trip - you need a goal or destination and a schedule before you can determine the best route.

CLARIFY YOUR GOALS

After listing your goals and your schedule, determine what you need to do to reach them. I often ask clients to visualize their life goals with respect to houses, vacations, weddings, cars, etc.

This may seem like a daunting task at first glance. A simple way to tackle it is to find the answers some questions:

•  How long do I have until I need to reach my goal?
•  How much do I need to accumulate by then?
•  What level of risk am I willing to take?
•  What tax issues do I need to consider?

The answers to these questions require research. In addition, there are some unique issues to consider when clarifying your higher-education funding and retirement goals:

College funding - If this is one of your primary financial goals, you need to establish the approximate cost of tuition, room and board at schools you'd like your children to attend. To this amount you should add other expenses such as travel to and from school, projected cost of books, etc.

This total is then adjusted for inflation, which will depend on the number of years until the money is needed.

Retirement preparation - A number of issues, including the uncertain future role of Social Security and increasing life expectancy, have made preparing for retirement a priority. By addressing your personal situation now, you can take some of the guesswork out of your retirement future.

While many of us want to have an optimal retirement, we may need to determine what would be acceptable.

CONSTRUCT AN INVESTMENT PROGRAM

Once you've clarified your goals, you need to design a program to help you reach them. With the range of investment possibilities available today, it's possible to construct a program for virtually every need.

The key lies in narrowing down the options to those appropriate for your individual situation.

How can I start preparing now?

Whether you're saving for a home at age 25 or trying to juggle finances to pay for your children's education at age 45, it's never going to be entirely easy. Perhaps the most logical answer to this dilemma? Pay yourself first.

To get started:

•  Develop a cash-flow analysis: Find out where all your money goes.
•  Reduce your expenses: Once the numbers are written out in front of you, you may see several ways of reducing expenses.
•  Establish a spending strategy: Review your accumulation goals, and determine a minimum percentage of your income that you need to invest and save each month to meet your goals - 10 to 20 percent, for example.

Accumulating money systematically breaks the task down into manageable amounts, introduces discipline into your accumulation program and fosters a pay-yourself-first philosophy. This strategy also will help you get started toward reaching your retirement goal.

And even if you've already identified your financial goals and planned an investment portfolio to meet them, it's still a good idea to check them against these steps.