The first order of business is to set your goals. The most important aspect here being, “what are you trying to accomplish?” There are no clear rules as it changes from person to person, couple to couple and family to family. It is also recommended that such goals are preferably written down so that you can revisit and re-evaluate on a regular basis. That being said, lets just jump in and take a look at the various aspects in goal setting.
Prioritize your goals
People evolve over time and so do goals and priorities. For e.g.: A new graduate’s priority might be to pay down student debt, credit card debt and save for an emergency fund; while a newly married couple might have a top priority of saving for down payment of a house. Some others dream of retiring early.
The easy one
Some decisions should be fairly straightforward and obvious: Always pay down your high interest debts such as credit card debt. High interest debt can have a debilitating effect on your financial future and this should be the highest priority for every single person.
The tricky one
You can set yourself three types of goals – short, medium and long term.
- Short term: Usually less-than-2 years from current time. For e.g.: emergency funds, car, vacations etc.
- Medium term: Usually 3-5 years. For e.g.: down payment for a house, vacation property etc.
- Long term: Usually 6+ years. For e.g.: pay down mortgage, save for children’s education, retirement etc.
Note that when it comes to investments (which will be discussed in detailed throughout this blog), the horizons should not matter – always invest for the long term. It is never recommended to invest in risky or questionable investments.
- I had a goal of generating passive income of $100 per month before I turned 30 in 2011. I failed in achieving that, but I did catch up a year later 🙂
- My other goal was to start blogging, which I finally did with this blog – Roadmap2Retire.
- Buy a house in the next year or two.
- Generate a passive income of $1,000 per month before I turn 40 in 2021.
Have you set your goals yet?
Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.