One of the keys to a successful life is the ability to set goals—but let’s be honest, some of us aren’t naturally goal-oriented. If you’re the kind of person who struggles to make weekend plans, never mind financial ones, you’re not alone. Goal-setting sends some people into cold sweats. In such cases, I like to reach for a simple acronym that is quite literally APT: Align your goals, Prioritize them, and finally, Take the necessary steps:
1) Align your goals: When I talk to couples I’m sometimes blown away by how conflicting their goals are. One spouse is doing everything to minimize their taxable income while the other is sweetly oblivious to tax planning; one partner builds emergency funds while the other builds credit card debt. Having two sets of incomes, credit scores, debts and personalities certainly adds complexity to the matter of setting goals. Even if you and your significant other are at opposite ends of the financial spectrum, you both need to get on the same page right off the bat, identifying what your separate goals are and finding a way to align them. Start by defining what your most conspicuous goals are, for example paying off the debts that are casting a big shadow over your household. Not only tax planning but estate planning also needs to be on the table. When making projections for the year ahead, many people forget to factor in what might happen to their assets in the event of death or sudden illness. A financial advisor can help you draw up the necessary legal documents, including living wills and powers of attorney for healthcare decisions.
2) Prioritize: When setting goals for ourselves, we often tend to think about them in a linear fashion—like a series of household chores that can only be handled one at a time. You’ve no doubt heard people, maybe even yourself, saying “I cannot start saving for retirement UNTIL I pay off my credit card debts.” Or: “I need to pay off this balance in full BEFORE tackling the others.” This is a big mistake. It’s okay to create a list, with your most pressing goal at the top, but understand that you can work on goals one to five simultaneously. Some of your goals may be in direct conflict with others, for instance saving for retirement and saving for your child’s education. Both have a claim on the finite resources at your disposal, so tough decisions may need to be made as to how much is allocated to each goal. It’s not going to be easy: Maxing out your 403(b), by diverting $18,500 (2018’s contribution limit) to your retirement plan, might mean less goes into your 529 college savings plan, but just remember you can’t borrow to retire—while your kids can take out student loans, work and look for scholarships.
3) Take the necessary steps: Once you have a clear understanding of what your financial goals are, in order of priority, the hardest part is over. You now know exactly what needs to go where. The rest is just going through the motions of possibly increasing your 403(b) contribution rate online, setting up credit card auto payments, scheduling an appointment with a financial advisor, and other straightforward steps.
Of course, financial sacrifices will need to be made as you adjust to your new budget, and that requires some serious self-discipline. But if you’re the kind of person for whom goal-setting is anathema, these three steps should put you on the right path.