What Do You Want? - Setting Financial Goals and Objectives

So now you’ve sketched your financial profile - a portrait of how you live today, you know how much you’re worth and you know what cash comes in and what goes out. But what about your goals and objectives?.

Goals are broad forecasts of what you want to achieve. An example ‘I want a comfortable retirement’. Objectives are more specific and tired to a time frame. ‘I want to retire on December 31 2012 with an income of GHc50,000 ($50,000) a year’, for instance.
The big picture
Not surprisingly, it’s easier to figure out what you really want in life if you take one step at a time. So you should paint the big picture – your goals – first. Then you can worry about filling in the details – your objectives – later.

As with every other part of the financial planning process, it’s important to commit your information and ideas to paper. So get out a pad of paper and pencil and write ‘Goals’ across the top of the page. Then jot down your list.
I recommend that you keep this page and all the other elements of your financial plan in a loose – leaf notebook. When it comes time to review your plan in six months or a year, you can easily update the individual parts.

Maybe you have only one goal – to save for retirement. Or maybe you have twenty. You are unique, so the details of what you want are unique as well. But it has been found out that five general goals apply to just about everyone. Here they are:

Goals 1: Protection Against Risk
What you want:
· Establish an emergency fund
· Purchase adequate insurance

Goals 2: Financial Security for Your Family
· What you want:
· Meet all family financial obligations without straining resources.
· Provide for care of all dependants
· Fund family tuition needs
· Aid children in their careers or car or home purchase
· Provide for special needs, such as the care of an elderly person

Goals 3: A Comfortable standard of Living
What you want:
· Travel frequently
· Purchase a new home or make improvements to your existing one
· Buy a vacation house
· Help finance special celebrations, such as weddings
· Entertain your family and friends
· Enjoy cultural events

Goal 4: A Secured And Comfortable Retirement
What you want:
· Keep the same standard of living you had during your working years
· Maintain financial independence during retirement
· Achieve financial security so that you may retire early
· Shield yourself from financial disaster in case of medical emergency

Goal 5: A Well- Planned Estate
What you want:
· Provide for our spouse
· Provide for dependents
· Arrange for the continued management of your assets
· Minimize estate taxes and estate management fees
· Make charitable bequests

Two points to keep in mind: the importance of each of these goals will change as you change and grow. For example, if you’re twenty-five years old, your priority is more likely ‘a comfortable standard of living’ than ‘a well-planned estate’’

And sometime unanticipated changes can make a big difference in your financial plans. For instance, a divorce might necessitate a change in your tax and employee benefits strategies. A new marriage might prompt you to change your will. The birth of a child might cause you to take a hard second look at your insurance and estate planning objectives.

Also the goals I listed, form the core of most financial plans - but they are not the only ones you should include. Your goals are uniquely yours. For instance, one of your goals might involve the lifelong care of a disabled child. In the final analysis, you – and you alone- must decide what you want.

What Next?
You’ve set your goals, now it is time to establish your objectives. Go back to your original list of goals, and construct a chart that looks something like this:

Goals 1: Protection Against Risk
Objectives: Establish an emergency fund
When: Three years from now
Cost: GHc5,000 ($5,000)

Goals 2: A Comfortable Standard of Living
Objectives: Purchase a second home
When: Five years from now
Cost: GHc20,000 ($20,000)

Your list, of course, will be much longer, more detailed, and more specific. Be sure you schedule short-term objectives as well as long-term goals.
Once you set your goals and objectives, your must measure your progress. With short-tem objectives, it’s easy and obvious. For example, you can readily see if you’ve met your objective of accumulating GHc5,000 ($5,000) in emergency cash fund.
It is not so simple to know if you’re on the right part to achieving your long-term goals – planning adequately for a comfortable retirement, as an example. So you must set bench marks along the way.

Remember too, that you should review your list of goals and objectives at regular intervals – at least once a year – and update it as your circumstances change.

Email me with any queries or comments.