Keep in mind, financial planning is for both _____________ and _____________ purchases. You need to set _____________ and have _____________ to follow through with those goals.
Why is financial planning What are some long-term goals that financial necessary? What are some unforeseen situations planning can help with? that can occur? • buying a home • • • • buying a car
• Planning helps when unforeseen situations happen, An • emergency fund can help pay for unexpected expenses.
Types of Financial Goals
Financial goal planning will help you avoid wasteful spending. Describe four financial goals you might want to achieve.
1. Create an emergency fund. You can use an emergency fund to save for large, unplanned life events, such as a job loss. 2. Find multiple sources of income. ________________________________________________________ ____________________________________________________________________________________ 3. Pay off debt. ________________________________________________________________________ Part-time jobs such as tutoring, babysitting, or working for a local shop can all help produce extra income. ___________________________________________________________________________________ 4. Cut spending. Reducing the amount of money you spend means that you’ll have more money to spend for other financial goals.
Other Goals to Consider
Other long-term goals to consider are ____________________, such as getting married and buying a house and ____________________.
Goal Planning Know what you want: As time goes by, I may decide to add more goals or fine-tune my goals. I need to review my goals regularly.
Understand your current finances:
A list or a table that shows your sources of income and expenses will help you analyze your finances. You can also list how much money you have in savings and any debts you may owe. Writing down your savings, income, and expenses will help you get a better picture of your current financial status and how much you’ll need to save to realize your goals.
Attach a cost to your goals: Once you know your goals and financial status, you need to attach a cost to each goal. The costs should indicate the total money, time, and effort spent toward realizing each goal. Attaching a cost to your goals will help you identify the obstacles associated with each goal and ways to deal with them.
Keep your goals flexible:
Your financial planning should be flexible enough to incorporate sudden changes. For example, having an emergency fund will help you avoid going into debt if your car breaks down. Having flexibility with your funds will help you stay on track to achieve your goals.
Review and revise your goals: Although my plans may change, it’s a good idea to write down my goals. When I know my goals, I can develop a financial plan to achieve them.
Remember your goals:
Follow your plan and have reminders that are visible daily to keep you on track. A simple strategy such as keeping a picture of your goal in your wallet may keep you from wasting money and lead you to success.
Short-Term Versus Long-Term Goals
Short-Term Goals Mid-Term Goals Long-Term Goals
pay rent new home pay off a mortgage
new car
vacation
pay off debt
less spending Boost emergency savings emergency fund
A solid financial plan includes these three priorities:
1. ____________________________ 2. paying off debt 3. ____________________________
SMART Goals A SMART has the following characteristics: Specific Example: Create an emergency fund. Measurable Example: Save $20/month for a new bike. Achievable Example: Put $10 per paycheck into a savings account. Realistic Example: Save $50/month for 2 years for a vacation. Timely Example: Put $50 per paycheck into an IRA account.
Good financial planning includes a set ____________________ for both short-term and ____________________ goals.
Mini Goals can help create a ____________________ toward achieving a main goal.
What is the difference between a mini goal and a short-term goal?
__________________________________________________________________________ Mini goals act as checkpoints that help determine whether the goal needs revision. Mini goals should not be confused with short-term goals. For example, if your short-term goal is to pay off a credit card within six months, your __________________________________________________________________________ mini goal could be to pay off at least one-sixth of the bill every month. Mini goals are like stepping stones toward a larger goal, while short-term goals can stand on their own. __________________________________________________________________________
In addition to writing down goals, you should also _______________________________ to meet those goals.
Money Management Techniques
Envelope Method Expense Tracking
Another way to manage money is to keep a log, or record, to track spent money. The envelope method helps you see exactly how much money you can spend on This method can be as simple as writing down expenses in a notebook. different types of bills. First you label envelopes with each category in your budget. Alternatively, you can use money-management software that tracks both income Then you place only the budgeted amount of cash in each envelope. This method and expenses automatically. Be sure to periodically review the log to get an idea of keeps you from overspending because when the cash is gone, you can’t spend in how much money you need on a daily, weekly, or monthly basis. By writing down that category. It may help to write on the envelope what you spent the cash on expenses, you’ll see exactly where your money is going and can cut down on each time you take money from it. unnecessary expenses.
Summary What is important to consider when thinking about financial goals?
Life is unpredictable, and expenses can be too. Saving money can help you prepare for unforeseen circumstances and help you achieve your dreams. Defining your goals assist you in achieving the things that are most important to you. When creating financial goals, consider how much money, time, and effort it takes. It is important to stay flexible because life is unpredictable. Review your financial goals often. Finding ways to be prepared for life events is essential for financial security.
