You always need to plan ahead and when it comes to your finances, this includes your long term goals. These are specific objectives you have that you want to reach at a certain point in the future. This is what most people would refer to as the big picture because it is their main financial goal in life and everything they do at present is meant to bring them closer to that goal.
For some, looking at their long term financial objectives help them regain a certain level of excitement with financial planning. Granted that it is not as exciting as planning a holiday trip with the whole family but it does have its own merits. For one, the thought of being able to pay off most, if not all your debt obligations should be enough to get you started with your list.
Nerdwalllet.com shares that US households have an average of about $132,529 debt in their finances. This covers mortgage payments, student loan repayments, as well as credit card debt, car loans, and others. These should be enough to get you started in planning for your future or you run the risk of being trapped in debt your whole life.
How to approach planning for your long term goals
Entrepreneur.com shares that it is important to have long term objectives, especially that the year is about to close and a new one is just around the corner. Here are a few things you can look at to help you get started.
Put together a list of long-term plans
You need to be able to list down what you want to happen in life. Is it buying a house or buying a car? Do you have plans of setting up a business of your own? Do you want to stay in an industry that you love all your life? Or is starting a family one of the things you want to accomplish? You need to have a list of the things you want to accomplish in life to have a great starting point in your planning stages.
If you are still single then this is a lot easier because you only have to list down the things that you need and want. However, it becomes much more challenging when you start to include other people such as a partner in life. This simply means that before you get into any serious relationship, you need to have a list of your own already.
Do a self-assessment on what is important for you
After you have the list, you need to conduct a personal evaluation and assessment of what is important to you in your list. Do you need to have a house before buying a car or is it the other way around? When do you want to start with your business venture and what would it be about? It is ideal to start a business that you are really interested in such as a hobby. Based on what is important to you, you can now prioritize your long term goals according to various stages in your life.
If you want to have a house and pay it off at age 55 then getting a 30-year loan at age 25 would be a nice plan. You are now able to work your timeline backward because of your list and priority. Just like how you prioritize debt payments, the same should be done with your long term goals.
Break them down into smaller details
If you look at your list of long term goals, you might get intimidated by the things you need to accomplish over time. At a young age, you are already talking about buying a house, traveling the world, starting a business and so on. Intimidation could make you put off the work which could result in missing your goals. The way around it is to break them down into doable milestones.
Take that house for example – if you still have a few years before getting a house then start saving up for the down payment every month until you reach your goal.If you are looking to start your own business in a few years then schedule classes or opportunities to advance in your hobby to help you prepare in turning it into a business. The idea is to break down your long term objectives into smaller goals that would not intimidate you.
Monitor your progress
You need to constantly be on top of your list monitoring your progress. It is important that you keep an eye out on your goals to make sure that you are in step and that you are on track in achieving them. However, there is a fine line between being too obsessive and being passive with your goals. Too much and you run the risk of burning out and too little and you might miss some telltale signs that you are running behind your target. Find a comfortable balance between the two to help you monitor your long term plans.
Adjust your plans as you go along
One of the constant things in this world is change. This can make you adjust and update the list you develop today to be relevant over time. Apart from monitoring your goals, you need to know when to make changes. Take for example your retirement goals and the amount you intend to have by the time you leave your corporate job. The amount you planned for today might not exactly be enough to cover your needs in the future. This is because you need to consider how inflation would affect your fund target. There might be a need to increase your monthly and annual contribution to compensate for the changes.
Important skills to reach your objective
As you plan for your long term goals, these skills would prove beneficial in your journey of realizing your financial objectives.
You need to have adequate know-how in managing your finances in order to make informed decisions. Although NFCC.org shares that only about two in five adults will jeep a close track of their spending, this is not all that you need. You need to know other important areas of your finances. Make an effort in learning and understanding various financial concepts to increase your ability to manage your money. This can be theories and other pertinent information to help you plan better in planning and execution.
Knowing what to do is just part of the process because you need to have the mantra and discipline to actually stick to your plans. This is similar to how you go about buying groceries for your household. You look around and list down what you need to get in the store. As you start filling up your grocery cart picking up items left and right, your list stays in your smartphone all the time. You check out and you are over budget once you get home, you forget important items in your list. The same applies with financial discipline, you have to stick to your long term plans. They are there for a reason and if you just keep them in a corner then they are no good for your financial plans.
Your long term plans for the future can be better achieved if the work starts at present. If you are looking to buy and pay off a house before you turn 60 years old, you need to work background. It is important to manage your time accordingly. Plan how you would be able to save up for the down payment. Think how you can buy a house before turning 30 years old so you pay off before 60. The same goes with your other long term goals. If you are trying to keep an eye out for a couple of them, you need to learn how to manage your time properly.
There are a lot of people who seems to spend a lot when they are experiencing extreme emotions. They believe in retail therapy when they are sad or in extreme fits of anger. There are also some people who seem to forget what their credit limit is. This happens when they are very happy or in a celebratory mood. There is nothing wrong in purchasing items every now and then. However, all your actions need to be in line with your long term plans. If buying a gadget now because you like it would mean getting behind on your target house down payment amount then you better think twice.
Your long term goals will help you put some structure in your financial goals. This can help dictate how you should approach your daily finances.