Shaping Your Financial Future: A Guide to Assessing Your Financial Goals

Step #2

The unyielding flow of time affects everything, and your financial goals are no exception. As circumstances change, what once seemed essential can become irrelevant, and new priorities may emerge. It's hence crucial to routinely review your financial goals to ensure they align with your current life situation and future aspirations.

Financial goals can be categorized into three main timeframes. Immediate or short-term goals are those you aim to achieve within the next year. These could be anything from building an emergency fund, saving for a vacation, or paying off a credit card debt. Medium-term goals span from two to five years and might include buying a new car, saving for a down payment on a house, or increasing retirement savings. Lastly, long-term goals are those extending beyond five years. These might include saving for a child's education or preparing for a comfortable retirement.

Understanding these timeframes is important, but the relevance of each goal within them is key. These should align with your current life situation and priorities. The iconic story of Jesse Itzler offers an interesting case in point. Itzler, who co-founded Marquis Jet and owned a portion of the Atlanta Hawks, reportedly lives by the mantra of "Remember tomorrow". He often asks himself whether the things he's working on today will still matter to him tomorrow. It's a philosophy that has guided his personal and financial decisions and kept him focused on what's genuinely important.

Hence, the first step in evaluating your goals is to examine whether they still resonate with you. Are they in sync with your current financial situation, lifestyle, and aspirations? If not, it's time to let them go. It's equally important to add any new goals that align with your evolving life circumstances.

Once your goals are updated and relevant, it's time to estimate their costs. This requires some research and perhaps the assistance of a financial advisor. Costs can be estimated based on current prices or projected future costs, taking into account the impact of inflation. This step is crucial to plan your savings and investment strategies effectively.

With the relevance of each goal determined and their costs estimated, you can now assess your progress. Compare your current savings to your target savings for each goal. Are you on track, or do you need to make adjustments to your savings rate or timelines? If a goal is looking unachievable, don't despair. Remember, it's better to revise your goals than to pursue unattainable ones.

A prominent example of adjusting goals comes from the life of Sara Blakely, the billionaire founder of Spanx. In her early career, she wanted to be a lawyer, but she didn't pass the law school admission test. Instead of giving up, she adjusted her career goal, which led her to discover an entirely new business opportunity in the undergarment industry. This story is a testament to the power of flexibility and adaptability when pursuing goals.

Establishing a regular review schedule is the next step in managing your financial goals effectively. Short-term goals should be reviewed every three to six months, as their fast-approaching deadlines leave little room for delay. Medium-term goals can be revisited annually, while long-term goals might only require a check-up every one to two years.

So, what can we take away from this discussion on assessing your financial goals? Firstly, regularly reviewing your goals allows for adjustments in response to life changes, ensuring they remain relevant and achievable. Secondly, updating cost estimates and savings targets as needed helps maintain a realistic view of your financial journey. Lastly, measuring progress regularly can help maintain momentum towards each goal, giving you the satisfaction of seeing your efforts bear fruit while alerting you to any areas that need extra attention.

Regular review and adjustment of your financial goals are not just essential bookkeeping practices. They form a key part of navigating your financial journey and steering it towards success. As you review your financial goals, remember that they are personal to you. They reflect not just your current situation and future aspirations, but also your values and the life you want to live. Thus, while it's wise to seek advice and learn from others, always ensure that your financial goals are uniquely yours.