We have one more step left before we begin choosing investments.
- We’ve determined how much the goals cost.
- We’ve looked at the tax ramifications.
Today we’re going to look at how the goals play against each other.
Each of us has long term goals and short term goals….and sometimes we’re surprised when we find out that we have two goals happening at the same time. As an example, clients would often tell me that they had goals of helping kids through college AND retirement…only to find out that both of these goals happened at the same time OR very close to each other.
How were they going to save for both?
It’s when you map out your goals that you see how they relate to each other. This has an incredible affect on your feelings regarding what’s important and what’s not. So, before we dive in to the last step….choosing investments, we need to complete this step.
- Take out a sheet of paper and on one end put stick people of yourself. On the other end place a headstone.
- Place year intervals between.
- Place balls of money on the different years when your goals occur, right off of your 4 cornerstones sheet. Note overlaps.
- Discuss overlaps and goals that are close to each other. If you can’t afford both, which goal wins?
- Divide your money between your goals. Now you know how much you’ll spend toward each goal!
Not enough for every goal? Then it’s time to decide: do you move goals back/forward? Do you lower/raise returns? Do you save more/less toward goals? Toggle each of these indicators until you have a plan.
Now you have a financial plan. Congratulations! You are now the proud owner of a wholehearted, solid financial plan.
At this point, we’re ready to do the piece that everyone loves to talk about but that always should come last…investing.
You shouldn’t invest until:
- You know your budget
- You have an emergency fund strategy
- You’ve outlined your goals
- You’ve taken into account emergencies that might occur
- You’ve decided on a course of action that includes the return you need for each goal
