Getting Organized
Once you’ve written down your financial goals, start organizing them.
By former Army Capt. Phil Dyer, CFP, Deputy Director, Benefits Information

Last month’s column in the series “Financial Planning 101” discussed the value of setting written goals and offered an exercise to help identify your personal, professional, and financial objectives.

Many people share common goals—getting out of debt or saving for retirement, for example—but you also might have several goals unique to your situation. These goals might include:

• retiring early to become a teacher;
• sailing around the world; or
• writing a book.

Once you have determined your exact goals, you can begin organizing. 

Start sorting. Divide your goal list into short (within two years), intermediate (two to five years), and long-term (five years or more) goals. Also, be aware that your goals might conflict. For example, if you currently have $40,000 in credit card and other consumer debt, it will be difficult to achieve other financial goals, such as saving for retirement or funding a college education.

Prioritize your goals. Which goals in each group are most important to you and your family? Which will bring you the most satisfaction? Which will make your other objectives more achievable? Place those goals at the top of each group. Sometimes it helps to start with an easily achievable goal and build on that success.

Write down the details. Next, give each goal a specific target date and dollar amount, if applicable. For example, if your grandchild is planning to attend college in the fall of 2010, and you want to save $25,000 to help with college costs, write it down! Consider jotting your goals, with target dates and costs, on index cards and posting them where you will see them every day. The bathroom mirror, the refrigerator door, and your car’s dashboard are great places. Reading your goals every day helps reinforce them.

Develop an action plan. Finally, break each goal into “action steps” that must be taken on a daily, weekly, or monthly basis. For example, John and Gladys Smith want to help fund their 7-year-old granddaughter Rebecca’s college education in 10 years. They commit to saving $25,000, which will require putting aside about $140 a month (assuming an 8 percent annual return). Their goal card might look like this:

Goal: Rebecca’s College Fund (August 2014 – $25,000)
Action steps:

1. Review monthly spending.
2. Decide on item(s) to cut.
3. Open a Section 529 college saving plan. 
4. Fund $140 a month through automatic contributions from a checking account.

John and Gladys can afford $100 a month, but will have to adjust their spending to find the extra $40 a month. Gladys buys a popular magazine at the checkout counter on her weekly commissary visits. The cover price is $3.29, or $171 annually. She can save $63 a year, or $5.25 a month, with an annual subscription. John and Gladys go to a popular coffee shop a few times a week and each gets a $3 latte. Cutting back from three visits a week to two saves an additional $25 a month. Finally, they decide to eat out one less time a month, which saves about $20 a month. With their total savings of about $150 a month, they can put the necessary $140 a month into Rebecca’s college account to meet their goal and even put a little extra in a rainy-day fund.

By identifying and organizing your goals, you’ve completed the second step toward achieving financial success. Next month’s column, the third installment of the “Financial Planning 101” series, will look at how to find “hidden” money and put it to use funding your goals.