1) Setting Investment Goals

Short Term Goals

• Examples: Save for a vacation, build an emergency fund, or buy a new gadget within the next year.

Mid Term Goals

• Examples: Purchase a car, save for a down payment on a house, or pay off credit card debt within 5 years.

Long Term Goals

• Examples: Buy a house, save for retirement, or fund children’s education over the next 10 to 30 years.

2) Putting a Price Tag on Your Goals

You likely have specific financial dreams you’d love to achieve in the coming years. Perhaps you want to buy a car by age 25, own a house by age 30, or become debt-free from credit cards and student loans. Assigning a price to each goal is essential for creating a clear plan to achieve them.

3) Learning How to Reach Your Goals

Once you’ve identified your goals, it’s time to create a plan to achieve them. For instance, if you want to save $1,000 in three years, you’ll need to save about $28 per month. Utilize tables and financial tools to break down your savings targets into manageable monthly contributions.

Where Does Your Money Go?

To gain control over your finances, you need to be aware of your spending habits. Maintain a detailed spending diary for one month to track where every dollar goes. This awareness will help you identify areas where you can cut back and save more.

Three Financial Rules of Thumb

Maintaining financial health requires adhering to the Debt Rule, Housing Rule, and Saving Rule

1. The Debt Rule: Keep your debt-to-income ratio below a certain percentage to maintain financial health.
2. The Housing Rule: Spend no more than 30% of your gross income on housing to ensure you have enough for other expenses.
3. The Saving Rule: Aim to save at least 20% of your income for future needs and investments.

Keeping Track of Money Coming In and Going Out

• Automate Bill Payments: Set up automatic payments for all your bills to simplify your finances and avoid late fees.
• Automate Savings: Have a portion of your paycheck or bank account automatically transferred to your savings account.
• Use Budgeting Tools: Utilize online budgeting tools to monitor and control your spending effectively.