Hi everyone and welcome back to Melissa Making Cents!

I hope you found my last blog about organizing your personal financial information binder useful! As some know… I practice what I preach. So not only did I complete the process, but I also gave my parents the homework exercise.  I got a few moans and groans about assigning the task, but in the end they both admitted they could see the value in having all their personal information easily accessible.

I urge you to use the process to begin talking to your parents and loved ones about their finances. It’s a great way to get on the same page and begin having important money conversations. Trust me.. I have seen situations where being open and organized has reduced personal heartache and headaches! 

Beginning in this new decade we should set a goal to change the taboos about discussing money with others.  Make a conscious effort to have regular check-ins with your family and friends. You never know if someone needs help getting onto a healthy financial path.

Setting goals are important for personal growth

Today I want to revisit the “Goals” tab in your personal binder.  Creating goals specific to your circumstances will help you grow both personally and financially.

My daughter turned 2 years old recently!  I have spent a lot of time lately looking through pictures and marveling at how far she has come since the moment the doctor put her in my arms.  We are naturally goal setters. I’ve watched in amazement as my daughter, unconsciously and consciously, has set goals for herself of trying to stand along the couch, and walking. Her finest goal so far in my humble opinion, was being able to open the dog food container to feed the dog multiple cups of food. Sully, our Jack Russell Terrier also seemed to applaud her for this new development. (I already have it marked on her “chores” list)

It’s all a matter of personal growth. I’m sure you can look at examples of your life where you have set goals for yourself and celebrated the personal victory.  If you can’t think of an example…. Now is the time to set goals! Challenge yourself and develop a plan to make it happen. 

Goals come in all sorts of shapes, sizes and categories

Goals are not always huge! In fact goals should not always be extravagant. Some goals will be bigger than others. It’s important, because if you set a monumental goal without smaller stops along the way, you might set yourself up for failure.

While training for my first half ironman triathlon, I learned the goal lesson the hard way. I signed up for the race thinking it wouldn’t be a big deal.  I mean everyone can ride a bike and run right? Except for that that I couldn’t swim.. and I would be expected to swim 1.2 miles for the event! Followed by 56 miles of biking, and then 13.1 miles of running. If you think it sounds like a great weekend… think again. It’s all done in the same day! That’s 7 hours (for me) of non stop forward movement in various forms… without a break for lunch.  So to accomplish my main goal of finishing the race, I had to set multiple goals in different categories. 

Getting your finances in order is like completing a triathlon

While working with my financial coaching clients, I find myself applying a lot of the things I learned from my triathlon training.  Completing a half ironman took a lot of discipline, and was physically, mentally and emotionally exhausting. You have a lot of factors and forces of nature, that can change at any minute. 

Well.. getting your finances in order is really no different. In the financial world we have three phases. Accumulation (or saving), Annuitization or distribution (spending), and “The After Party” aka death.  Each phase will have its own challenges and goals for each phase can be very very different! But.. in order to complete your financial plan, you will successfully need to complete each of the three legs of the journey.

Let me pause for a second to clear the air.  I am using the words “Accumulation” and “Annuitization” in general terms, I am not in any way shape or form recommending the purchase of an annuity product.  In the insurance world, annuity products use these terms to differentiate the different phases, which is also universal to the general financial world. Annuities are NOT for everyone, and a qualified investment professional should be consulted to make sure any product you are considering works in conjunction with your customized financial plan.  (Now back to your regularly scheduled programming…..)

Accumulation refers to growing your money until you retire

Accumulation is definitely the longest phase of our journey.  In this phase you will set goals for yourself that help you to build healthy finances for your future. This might mean setting goals to get out of debt, save for major life purchases or education, or even creating an emergency fund.  Because… if I can guarantee you anything it’s that at some point in this phase the AC will break, followed by every other appliance in your house going kaput. Much like being on a bike for 56 miles, you can be sure that you will face a 26 mph headwind that makes you feel like you are not advancing anymore in life. Being persistent and trusting your training will get you through the tough times in life. And yes… you will feel exhausted and wind burned, but you will succeed because you were diligent enough to set aside emergency funds.

Accumulation is going to be different in length for a lot of people. People that are more focused on saving for their future will likely have shorter accumulation periods that individuals that have a lot of debt or unhealthy spending habits. This really is about squirreling away the proverbial nuts for a long winter. Or building that Nest Egg you hear so much about. Whichever image you prefer using… make your accumulation goals the short to mid term goals.

Annuitization refers to being able to spend your savings

You work hard to get through the accumulation phase, and now it’s time to sit back and enjoy life. This is what you have worked your entire life for! Every dollar saved, and every sacrifice you may have made for your financial future. Much like accumulation, we are going to have to set goals for this phase of our journey. Mainly… let’s not run out of money before the end of the phase. Goals for this phase in life are going to be about comfort. Hopefully you have sacrificed enough in accumulation, and you can now sit back and enjoy the ride home. 

Since Annuitization generally refers to retirement, it’s considered a mid to long term goal. Again… this phase is going to differ for individuals based on factors such as savings or pensions they may be entitled to receive. 

The only things certain in life are death and taxes

The final phase of our journey is certainly the least favorite to discuss. There is no way out of it, nature ALWAYS wins! It’s definitely NOT a hit at parties, but it is the most permanent of the three phases. No one likes to consider their own mortality, nor that of any loved ones. Every day you can pick up a newspaper and find a list of people who have passed away.  The hope is that you have your finances in order to make your transition easier on your family and loved ones. Goals in this phase are pretty straight forward. (Notice I didn’t say simple!) The goal is to be able to provide for your loved ones when you are long around to provide for them. 

If you think planning for death is something you do late in life… you are very wrong. According to a December 1, 2019 Washington Post article, “According to the latest statistics on life expectancy, the U.S. has experienced a decline in life expectancy for the third straight year. What’s particularly alarming is that researchers attribute the downturn to a growing number of people dying relatively young, between the ages of 25 and 64.” The recent passing of the legendary Kobe Bryant at age 41, is a very sad reminder that death will not exclude you based on age, sex or financial status.

Set your goals in life to be SMART

While there is absolutely no such thing as a dumb goal, we want to have goals that are SMART.  Specific, Measurable, Attainable, Relevant and Timely. We have already discussed the different phases in your finances. Now it’s time to think about what goals you would like to set to help secure your financial future!

Goals should be specific to your financial situation

Specific goals are important to your finances, and generally your goals will be unique to you. Simply setting a goal of retirement isn’t quite enough. It’s important to consider “who, what, why, when and where”. You might be thinking that retirement is everyone’s goal, and of course you are right. But it’s important to think about the specifics behind what your desired retirement may look like. If you are planning to purchase a yacht in Saint Tropez.. you may be working a lot harder than someone that simple wants to retire and spend time gardening.

Goals should be measurable

Someone once gave me instructions to their house by telling me to turn left at the big oak tree.  I failed the task in two separate ways. First, It was winter and I could not distinguish between types of trees. Second, all the trees looked big to this city girl! Had he told me that I would turn left  1.5 miles after exiting the highway, I would have found it without a problem.  

So keep that in mind when you are setting your goals.  How will you measure your success in reaching your goal? Are you trying to reach a certain income level, or do you have a specific nest egg size in mind?

Goals should be attainable 

If you are still thinking about that yacht I mentioned above, you will need to decide if it is a goal that really is achievable for you. The cost of a yacht is mind blowing. I will point you to a Business Insider article written by Hilliard Hoffower in which she refers to yachts as “floating money”. She goes on the say that “Generally, yachts over 100 feet cost $1 million per 3.3 feet — and that's not counting costs for upkeep.” For most of us… this type of goal is just not attainable. You may consider a compromise at this point! Maybe a smaller boat or simply put.. A different lifestyle.

Goals need to be realistic and relevant to your life

Making goals that are realistic go hand in hand with being attainable.  Let’s face it… a teacher will likely not be able to save the millions it requires to purchase and maintain our yacht,  This is very much unrealistic and has no relevance to a teacher’s life. But… a teacher saving a large amount in retirement with the goal of retiring early is a very real possibility.

And…. Karen… if you are reading this… this applies to you and the private island you have in your financial goal priorities!   Just saying…

Goals need to be time specific or time-bound

As I said earlier, it’s important to make smaller goals that help you work towards the bigger goals.  For me and the triathlon… it was first learning how to swim. But with that I also had smaller goals of being able to put my face in the water, conquering my fear of sinking, and struggling just to make it to the end of the pool. All of this was limited to a short 4 months.

Planning your financial goals is exactly the same. It’s assumed that we all have the goal of retiring some day. So we aim for smaller goals that help us to get to retirement. We all come from different backgrounds, and have learned various money skills. Some awesome...some not so great. So time wise… people’s goals will also vary.

It is important to pull all of your goal planning together as a family. 

If you haven’t picked up on my central theme here…. Let me just bring it home.  It is rare that your goals are going to perfectly match someone else’s! While your goals might align with another person’s, the chances are high that they will still vary in time, need or magnitude.

As a family it’s important to have family goals that your individual goals support. This might mean that you and your spouse are planning to retire, but would like to still help your children/grandchildren through school.  Depending on your financial situation and circumstances.. this might be a SMART goal… or you may need to set smaller goals to make it happen. This may also require the students to set financial and academic goals for themselves to ensure the parents still have a comfortable retirement.  

Setting goals are essential to your financial plan

Without any specific goals, your finances might meander through life. Now is the time to put your goals in your binder, and make a plan to help them happen!  As a CERTIFIED FINANCIAL PLANNER™ I work with clients to help them create SMART goals to a healthy financial future. If you are unsure where to start, or confused as to how you will get there…schedule an appointment with me! 

Until next time... this is Melissa Making Cents!

Melissa Anne Cox

CERTIFIED FINANCIAL PLANNER™

College Funding and Student Loan Advisor