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Financial Goal Setting

It requires wise planning to achieve your personal earnings, savings, and investing goals. It is important to be realistic about financial goals and to agree on them. Otherwise, one of you will be dreaming of a killer stereo system while the other is determined to pay off a bill. Goals are the foundation for any financial plan, and the actions that follow should be personally meaningful and clearly written. One reason couples can become financial failures is they haven't thought through their goals, so they are working at cross-purposes or they let their income float through their fingers.

Short term goals are goals that can be accomplished in one year. Intermediate goals can be accomplished between 1 to 5 years. Long-term goals are those requiring five years or more to achieve. With goals as a guide, every financial decision becomes easier.

It is also important to be specific about your goals. Achievable goals are SMART goals (specific, measurable, attainable, realistic, and time-bound). For example, if your goal is to save enough money for a one-week vacation, you would need to research the price of travel, lodging, entertainment and food for one week. Once you know the total price (with maybe a little extra for unforeseen expenses), divide it by the number of weeks or months left until you want to go on your vacation. How much will you need to save each week or month to reach your goal? You may need to adjust what you spend on other things to be able to save that much each week or month.

Think about some financial goals you would like to achieve. Divide them into short, intermediate, and long term goals. Be as specific as possible. How soon would you like to achieve each goal? How much money will it take to accomplish each goal? Take the time to write down (or tape-record) each goal and attach a price tag to it using the Financial Goals Worksheet . Each partner should do this for him or herself before comparing their goals. Sort your goals into those: 1) that are the most important, 2) that you want a lot but could live without if necessary, and 3) that you could give up easily.

Financial Goal Setting - Part 2

The next step is to choose a time when you won't be interrupted to discuss your goals. Which goals do you agree upon? If you don't agree on a goal, where or how can you compromise? Here it is important to think creatively and to be open to each other's ideas.

One or the other of you may have to downsize your goals, or postpone achieving them because of unexpected events, such as an illness, injury or layoff. In this case, you will need to go back to the drawing board; discuss how you can eventually achieve these goals, or modify them so as to make them more possible.

Some couples find posting a goal list on a bulletin board in their home or the front of the refrigerator is very helpful. Seeing your goals every time you go to the refrigerator can be reinforcing. If you break your goals into small steps, you can treat yourself as you achieve each step. For example, Ann and John wanted to save enough for a down-payment on a new house. However, they also had two children that would be college age in a few years. By posting their goal on the refrigerator where everyone could see it every day, they actually achieved their goal 6 months earlier than expected. They also built in rewards for each step. When they achieved each dollar amount, they took the whole family out to dinner. If they got lazy about their goal, their children would remind them (true story).

How Much Do You Make?

For most couples, the money they have to spend, save, and invest is earned through work. Today, two-earner families are the norm although each spouse may make widely different amounts.

Surprisingly, most couples marry without having any discussions about money, including how much each spouse earns, how much they will earn together, or what their plans are for earning money in one year or five. They may not even know if their combined salaries are enough to cover their current expenses. It just does not seem very romantic to talk about income, credit, and savings when you are dating. Then when you marry, you are on unexplored territory with all the emotional baggage that money brings along.

Before you and your spouse can make decisions about how to spend your income, think about how you earn your money. How much do you expect to earn in your lifetime? What fringe benefits (such as health and life insurance) come with your jobs or professions? What other expenses are paid by your employer? Can you increase income your by improving your performance or skills so that you are worth more to your employer? How do you feel about both husbands and wives working outside the home? Are you prepared for a loss of income if one spouse stays home to care for children?

The self-employed, people who work on commission, farmers, and others with irregular income may not have the precision in plotting their income that those who work for a salary or wage have. If that is your situation, estimate your income for your smallest and largest amounts, arrive at an average of the two and plan your expenses to fall under that amount. On the months or quarters when your income exceeds your expenses, save the excess for the leaner months. A large surplus can pay for "extras" such as a vacation, a new stove, or something special. Use the table below to plan how much income flows into your household each month:

  Salaries/Wages Money from Investments Money from Self Employment All Other Money

Remember, the amount of income you earn has nothing to do with how well you manage it. People who earn large amounts of money can have trouble making ends meet every month just as people who earn very little can, through careful managing, achieve their financial goals.

Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2005, November 28). Finances. Retrieved January 08, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: This work is licensed under a Creative Commons License Creative Commons License