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Financial Goal-Setting Starts with 'the End in Mind'

The previous blogs in our series on Smart Family Finances covered several personal aspects about planning for financial independence, including:

  • Conducting an on-going inventory of assets, liabilities, goals and financial knowledge
  • Understanding your own financial beliefs and how they are formed
  • Getting a grasp on personal living requirements

An equally important aspect of financial planning is setting goals.

Step #1: Begin with the End in Mind

In the enormously successful book "Seven Habits of Highly Effective People," Habit #2 encompasses the essence of goal-based financial planning, which is "Begin with the end in mind." A modest declaration of “the end” is a great launching point to analyzing alternative paths to accomplishing goals, weighing options, and making choices to define a path toward achievement.

While financial autonomy is paramount to most of us, planning is not limited just to retirement, which often takes place many years down the road. There may be interim accomplishments to declare in one’s financial roadmap. These goals are commonly organized around such areas as:

  • general lifestyle
  • buying a home
  • starting a business
  • large purchases (vacation homes, cars)
  • college for children
  • family events (wedding, family reunion)
  • charitable pursuits
  • travel and hobbies
  • retiring comfortably
  • general financial independence
  • making family gifts
  • organizing one's estate

Of course, these goals may not be independent of one another. For some people, expenditures for second homes, college, and family events might achieve their lifestyle and family goals but delay retirement and charitable goals. However for others, there may be no impact at all. That is the point of planning — to gauge the impact of potential options and make informed decisions.

Step #2: Analyze Trade-offs

While “begin with end in mind” is considered the planning launching point, the heart of planning is all about analyzing trade-offs. Intelligent trade-offs are best uncovered by understanding one’s personal situation, goals, and inter-relationship of financial management elements for any given circumstance, such as management of investments, taxes, debt, cash flow in retirement, risk, and estate planning.

For help in analyzing your trade-offs, sit down with a professional financial advisor to explore your unique circumstances. There is no one-size-fits-all approach when it comes to financial planning.

Next in our series, we will discuss some of the common questions we receive as financial advisors, as well as how to put all those “smart family finance” puzzle pieces together and build a successful financial future.

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