JLB: Financial Goals

Guest blogger JLB writes:
Happy New Year everyone!! As I do every year, I spent last night reviewing my 2007 goals and created new goals for the coming year. So many people have on their list (though, many people don’t) – “create and stick to a budget” or “save money” or “spend less.”

All of these terms, while they sound great, are all extremely vague. Some people love putting these phrases/goals down as concepts, but at the same time have no idea how to effectively accomplish such. As with anything you want to accomplish, it is imperative to identify what your financial goals are.

Before the not-so-scary task of creating a budget you need to identify what it is that you want to accomplish with your money. Do you want to go on vacation? Buy a house? Go back to school? Get out of debt? Save $10,000? What?

The next step to identify is your timeframe - when do you want to do this by? The end of March? 2008? 2010? And then comes the bigger question, how are you going to save for it?

Many people (particularly overachievers) have heard of the term SMART goals. If you haven’t, SMART depicts what each goal (whether financial or not) should entail:

S – Specific

M – Measurable

A – Attainable

R- Reasonable

T- Timeframe

For me personally, I break down my financial goals into three categories – you can alter these time periods as you see fit, as this is just a general guide.

• Short Term: 1-6 months
  
• e.g. – West Elm desk, new Coach bag, visit friend in Alaska, save $2,000 for business school visits and application fees.

• Intermediate: 1-3 yrs
• e.g. –Trip to the World Cup in NZ, save $10,000 to live on while at business school, increase net worth by 25% by xx date.

• Long term – 5 yrs +
• e.g. – payoff student loan debt, own a house, travel to South America for a month, contribute $5,000 to nephew’s college fund

Once you have identified what exactly your financial goals are, you are then equipped to create a budget and financial plan that will help you achieve your goals. See below of one of my personal financial goals which I established at the beginning of 2006:

Goal: Go to NZ in 2011 for the Rugby World Cup (which would be a vacation for at least 2 weeks).

Specific – the goal is specific in terms of what exactly I want to do.

Measurable – given current prices of airfare, tickets, food, accommodations et al, I have estimated that I would like to save $6,000 to be comfortable while there.

Attainable – since I created my goal last year, I think that I will be able to attain my goal of $6,000 in 5 years.

Reasonable – because I have time on my side, the amount I have to save regularly ($50/paycheck) is not unreasonable to me. ($6,000/5 = $1200/yr; $1200/24 paychecks = $50/paycheck). I've set it up so $50 is automatically transferred into an earmarked savings account at ING on the 15^th and 30^th of every month. (ING is a great tool for incremental savings - be sure to read the "Pay Yourself First!" section)

Timeframe – I have 5 years to complete my goal. $50 every two weeks, no problem.

So…what are your goals? Stay tuned for tips to help create a budget to achieve them!!

~JLB

Personal Finance: Welcome!

JLB:
First I'd like to thank Lee for asking me to be a guest blogger. I get SO many questions from SO many of my friends about personal finance, that I figured it would be great to start writing them down. Since many of the areas of life are linked to our financial situation, we both thought it would make sense to offer some of these tips to fellow overachievers.

My goal with this column is to offer informal advice (non-"professional" with no legal liability) on basic personal finance. The coaching that Lee offers can help you formulate and work towards goals in certain areas of life, and I'd like to offer some financial knowledge, skills, and best practices to help you make those goals a reality.

For example: "I'm doing __insert "what you do now"__ for a living. In an ideal world I would LOVE to be doing __insert "your dream job"__ for a living, except the pay sucks and I don't think I could live off of that". Example #2 – "I've realized that while I love my job, one of my goals is to travel 2-3 times a year. The problem is - I can't afford it".

As a diagnosed overachiever, rugby player and busy professional, I know how money plays a big part in our lives. I enjoy the world of personal finance, so I want to share what I've learned to help you get more out of life by making your money work FOR you.

Additionally, I want to encourage young people (ages 18-30) to start saving and taking their financial health seriously. The one thing we do have on our side is TIME. And as this blog has mentioned in previous posts (Time vs. Money and Money, Money, Money), TIME IS MONEY!!! My goal is to offer an overview of various topics with easy money saving tricks, tips, and habits that you can put into practice now.

If there are specific topics you want covered, email Lee at leeknight@overachievercoach.com and I'll make sure to blog about it. Please feel free to add your thoughts, suggestions, and personal tips to the discussion through the comments section.

For my first post, I'll do something rather timely because it is the first chance to practice one of my favorite concepts – budgeting!!! Stay tuned.

-JLB

Money, Money, Money

In my recent newsletter, the section called "Thoughts to Consider" offered a perspective from one of my blog posts entitled "Time vs. Money".

A friend of mine emailed me back with the philosophy and approach she's trying to put into practice in her own life. I haven't read the book she mentions, but the advice is great.

I am moving toward Joe Dominguez's solution ( I hope and aspire to it anyway): Your Money or Your Life.

Summary: Know what you need. Know what you spend. Need less. So you're not dependent on earning money and spending tons of time earning money but you spend time on what matters to you most, or you have time to figure out what that is.

Speaking of money, I've been traveling quite a bit and am starting to realize the dent it's been making on my finances. When I told my friend I needed a break from the jet-setting to let the coffers build back up, her response (left in "quick email speak") had a great metaphor -

yeah you are probably having a cash post buzz. sometimes it feels like you spend more than you do just cuz you have so much fun. also sometimes you really do spend that much, lol. but I know what you mean. its like when you've run a red light that was really red. you're like ok, I got away with it but I need to calm down for a while before my luck runs out.

It's also interesting that in the first few workshops, the topic of money and financial stability came up repeatedly. Many of us still have debt from school (or are still in school), have struggled to climb up from the bottom of the totem pole, and have started thinking about the future.

Maybe we want to buy an apt/house, a new car, pay off our credit cards and bills with no problem, or invest more in our 401k. Maybe we want to have enough to take a long backpacking vacation through South America, or create a financial safety-net to eventually start our own business, or just have the ability to go out with friends and not feel guilty for spending so much.

Why is it so hard to save money? Is it that we don't have a unifying money strategy or approach (like my friend who's motto is "Know what you need. Know what you spend. Need less."), or maybe we don't have clear financial goals to inspire us and keep us focused. If we have both a money strategy and a clear financial goal, maybe we need help with the daily discipline of resisting the temptation to buy those shoes or that new DVD player. It's starting to sound like any other area of business or life that needs attention - values/approach, strategy, action plan. If you'd like help with this, check out my coaching services.

• What's your philosophy or approach to money?
• What would you like to improve about your financial situation?
• Would you attend a workshop that focuses on setting and achieving financial goals?