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Goal
Setting & Financial Planning
The first step to wealth is
planning.
Too many people wait
until they have crossed over into middle age to start
planning for their financial future. It's
never too late to develop a plan. However, the earlier
you start to plan, the better. Early planning can ensure
you have a "nest egg" when you retire, help you to save
more money, and improve your quality of life. Goal
setting is a major component of financial planning.
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Financial goals should be written down.
In a marriage this helps both parties to
be clear on what the other wants for the
family. Both parties can agree on what's
most important. Single people can also
be more clear on what they want to
accomplish financially. In the book,
Ernst & Young's Personal Financial
Planning Guide, Martin Nissenbaum and
others write, "a realistic framework is
vital to the process of fulfilling your
goals-not just the goals you are aware
of, but also those you may not have yet
identified."
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Goals should be broken down into
short-term, intermediate, and long-term
goals. The most successful financial
planners have discovered that long-term
goals are more successful if the short
and mid-term goals are used as markers
or stepping stones to accomplish the
long-term goals. Short-term goals are
those that can be accomplished in a
matter of months up to a year.
Intermediate goals are goals that can be
accomplished within five years.
Long-term goals are established for
outlooks beyond five years.
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Conduct an inventory of the resources
that you have available to help you
accomplish your goals. Personal
financial statements, checkbooks, and
other financial records can help paint a
clear picture of all the resources at
your disposal. These documents should be
used to tally all your assets. To
determine your net worth, you must
subtract all your debts from what you
owe. Knowing where you are will help
develop the strategy to get to where you
want to go.
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The Action plan is the steps you will
take to save, spend, and budget to meet
your goals. To develop an action plan,
make savings your priority. Use an
automatic savings plan if you can't rely
on yourself to put the money away
manually. Suggest
that paying off your debts should be one
of your top priorities as well. With
your debts looming over your head, you
can never experience financial
independence. Dedicate 10 to 15 percent
of your income to paying off your debts.
Once your debts are paid down continue
depositing money into your savings
account to meet your other goals.
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Review your goals often and revisit the
plan with your Advisor at least
annually.
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