By: Austin Colby, CFP®, MBA
My wife and I just finished reviewing our 2017 finances, planned our 2018 budget, and set some detailed 2018 financial goals. Those three activities are paramount for quality financial planning: Reviewing, Planning Ahead and Setting Goals. And, they can be exciting!
Doing a quick recap of what happened in 2017 allows us time to discuss our actions and decisions that led to 2017’s financial outcome. Can we learn anything from what we did last year? Did we establish a new, excellent financial habit? Did we develop a new, unfortunate one?
PLANNING AHEAD IS THE PROCESS of creating your personalized roadmap for your future. We start with the end in mind, and work backwards to give us actionable items each month. Set the vacation/fun budget for the year and begin planning an exciting way to use those dollars. Set personal challenges and goals to keep each other on track.
Goal-setting helps us create the individual action items, and keeps our eye on the prize. If you want to cross the $1,000,000 net worth number for the first time, write down the goal and your behaviors will have a much higher probability of falling in line. If you want to become 100% debt-free, write down the goal and create a schedule for 2018 that will allow that to happen.
Part of what we help our clients do is visualize the big-picture goals and break down each step needed to get help them accomplish them. A part of that process is reviewing how we got where we are today. If we want our financial house to look a certain way at age 50, 60, 70 or 80, then what does it have to look like at 45, 55, 65, or 75 to make sure we are on track. And if that is the case, then what does it have to look like at 40, 50, 60 or 70…etc. Eventually, you work all the way back to this: what do I have to start doing this month to stay on track.