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Empowering your money

How to set personal financial goals

If you do not know where you are going, how will you know when you get there? This is very true about financial goals. You need to set financial goals to help you make wise financial decisions, and also as a reward for your efforts. Goals should be clear, concise, detailed, and written down.

Unwritten goals are just wishes. Those who set goals and fail often find that they didn't set realistic goals to begin with. So, the first step in setting any goal is to determine what is realistic and what is not. In this article, you will learn how to set realistic and achievable financial goals.

How you achieve your goals

You achieve your financial goals when you have the cash available to satisfy some immediate financial need, want, or desire. The key is to be prepared to have the required cash when the time comes to achieve the goal.

For example, suppose you want to buy a brand-new car costing $30,000 using cash five years from today. In five years and one day, you will know whether you achieved that goal. If you have the $30,000 five years from today, you have achieved your goal. That is all pretty definite, but is it realistic?

You will have more than one financial goal to achieve. Besides the new car, you might be considering buying a home, funding higher education, paying for a wedding, taking a vacation, or accumulating retirement nest savings. Each financial goal has its own price and time horizon—when you need the money.

Chris Economou, left, a financial planner, goes over college paperwork with son Thane 18, in their home office in Tulsa, Okla. Saturday Sept. 2, 2006. Financial planners face the same issues that other parents do when their kids head off to college: Should they take checks, debit cards, credit cards _ or some combination of the three? The experts seem to favor checks and debit cards for day-to-day spending with a credit card tucked away somewhere safe for emergencies.  (AP Photo/Brandi Simons)
Chris Economou, left, a financial planner, goes over paperwork with son Thane 18, in their home office in Tulsa, Okla. (Photo: AP Photo/Brandi Simons)

You should have a plan

In order to achieve all your goals, you will need a plan. Starting from what you already have available, you will need to determine how much more you need to accumulate and when you will need it. Don't neglect to consider that the price of your goal items might actually increase as well. Depending upon how you invest your savings over time, you might receive interest, dividends, or gains to help you along—you should consider this as well.

Do you have the means to make additional investments necessary to accumulate the required wealth? Don't neglect to consider the effects of taxes on your savings. After considering the foregoing, you might determine that you can achieve some goals in less time. Or you might find that it could take longer. The time horizon is important to setting realistic goals.

Dive deeper: Financial planning 101: What it is and how to do it

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

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