I tried reading personal finance articles on how to locate short, intermediate and long term financial goals. However, they were too technical and dry for me. They somehow were never able to fit into my bracket of a young, not married woman. All the articles were for people in school or people with a family neither applied to me.
Therefore, I decided to put the articles aside and get to the basics of it. Here is how I did that:
- I wrote in list form all the major events or milestones I am anticipating in my life
- I wrote a list of all the things I would like to do or achieve
- I included all the things I think would be expected from me as a member of my family and community as a whole. In other words what would be my financial obligations to them
This is how my list looked like without any order of importance:
- I will pursue schooling further
- I will be an established business owner
- I will get married
- I will move in with my husband
- I will have children
- I will need extra help around the house
- I will take my kids to school
- I will take care of my parents when they grow old
- I will help with funerals, weddings and births in the family
- I want to travel and enjoy the world
- I want to partake in events or experiences that are memorable and will make me happy
- I shall grow old
- I will die
With that list I am now able to know what I want my money to do for me. I want to go to school so I need an education fund for myself. My kids will have to go school. I broke it down very crudely the expense I expect to occur with my children’s’ education for their entire schooling up until bachelor’s degree. With that total I broke it down to how much I would need to start saving now in order to be able to give them that education.
Another example, it is inevitable that I will grow old. When I am old do I expect my children to take care of me? No. Thus, I need to start saving for a retirement plan. I have a figure like for education that I want to attain and I worked backwards to find out what my financial obligation would be if I did not invest the money in anything. Same thing with life insurance. After death I do not want my family to suffer because I am not there.
Working this way has also helped me figure what is short, intermediate and long term. Simply because there are some items that clearly a lifetime commitment. However, by starting to understand your financial obligation now and working towards saving it. You are now in a better place to discuss financial options and what is best for what goal.
It also helps in prioritising needs. I have chosen, down payment for a house by 30, retirement fund, Health insurance and children’s education fund to be the big ticket items. Those are my long term financial goals. These are goals that I will not rip benefits after ten years and above.
My intermediate goals are establishing committee funds, my personal education fund, establishing Inteco and start building a future home fund. These are goals that will take me 1-10 years to achieve.
Lastly, I have my short term goals that will take up to a year to achieve. My personal growth, travelling, committee and entertainment fund can come here. This category I can do away with a lot so that I am able to focus on my intermediary and long term goals. The beauty of been young is I can afford to aggressively save for the long term goals now so that they can attract a higher interest for a longer period.
With My map clear I can now approach a financial adviser to establish the amount I need to save in order to reach different goals. I am pretty confident having that conversation with them and been able to evaluate a company because I know what my end goal is.
I hope you enjoyed my series of financial freedom. It is never really early to start having this conversation about money with friends and professionals. Let us be proactive with our money rather than reactive. I will share my journey as it happens and the goals I have achieved thus far.