The start of a new year is a great time to get serious about your financial goals.
Would you like to:
Whatever your goals, they will be easier to pursue and realize if they are clearly defined. It's like planning a trip: You need to know your exact destination before deciding how to get there. Here's how to turn daydreams about the future into concrete goals:
SMART goals are:
People who write down their goals are 50% more likely to achieve them, according to Dr. Gail Matthews, a clinical psychologist from Dominican University of California. Also, multiple goals are easier to coordinate when they're in written form.
Categorize each goal as either short-term (one to three years away), intermediate-term (three to seven years away) or long-term (seven or more years away). It might help to focus on pursuing smaller, short-term goals first, because achieving them could give you the shot of confidence you need to go after more costly, longer-term goals. When it comes to retirement, however, remember that the sooner you start saving and investing, the sooner you can start taking advantage of compounding earnings on your nest egg.
Keep your goals list handy so you can give it a fresh look at least once a year.
Once you've set your goals and put them in writing, you can develop action plans to achieve them. Create an investment strategy for each goal you'll be saving for, based on your desired investment return, your tolerance for risk, and how much time you've given yourself to achieve it.
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This article is used with permission of Ernst & Young LLP.