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Creating a Goal Based Framework for Financial Planning

When it comes to financial goals, creating a plan to achieve them can be difficult. While spending, saving, and investing should be the basis of the plan from the beginning, they often become reactive.

The key to successful financial planning is to set proactive goals and be specific with how much you’re allocating to each goal, how frequently, and over how much time. Goal setting in financial planning will help to keep you on track and to ensure success.

Priorities and Goal Setting

There are five main categories of investing goals that require significant savings – retirement, buying a house, college planning, creating an emergency fund, and paying down any debt.

Set goals for each financial category, in priority. If you must pay down debt, that should take priority over any longer-term goal.

Next, estimate how much you’ll need for each goal. By beginning with the end in mind, you’ll have a good starting point for your budgeting and planning.

A Budget and Savings for Each Goal

Once you’ve defined and prioritized your goals, it’s time to crunch numbers. Determine the dollar amount you can consistently allocate to each goal – direct deposit into a dedicated investment account is a simple way to achieve this. For retirement and college planning, you may be able to start smaller vs. paying down your debt where may need to allocate more.

As life changes, whether a career change or new baby or significant change in salary, it’s important to adapt as you adjust how you budget and save for each goal.

Measuring and Optimizing

Just as it’s important to rebalance your portfolio to keep your investments on track, the same goes for budgeting to meet your goals.

Reviewing your goals on a monthly or quarterly basis will keep you on track and it will also let you know if you need to make any changes in spending, saving, and investing.

Bottom line

One of the best ways to determine how you should budget, save, and spend is to work with a financial advisor. Or, if you’re going to go at it solo, it can be as simple as tracking your financial plan in a spreadsheet to help you accomplish your ultimate vision.


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