Setting Goals and Prioritizing
Mar 27, 2015
In 2013, T. Rowe Price survey “Parents, Teens, and Money,” several significant findings were revealed. Parents are not very good at setting goals and prioritizing the most important things they want for themselves and their families. The most significant financial weakness that afflicts both parents and their teens is that they focus too much on short-term money matters and haven’t focused on long-term goals. The survey polled 1,014 parents and 839 teens.
Most parents (73%) have regular conversations with their teens about money but they tend to shy away from having conversations about long-term priorities, like saving for college. While 66% pf parents agree that education beyond high school (vocational training or college) is a key to a strong financial future, more parents (46%) save regularly for vacation than they do for the college years (39%). Not surprisingly teens display the same short-term focus as their parents. Sixty-three percent of teens who are working say they are spending all their money right away and only 1 in 4 teens are saving for college.
There are three key steps to reaching financial goals:
- Identifying and prioritizing.
Harold Evensky, author, speaker, and pioneer in the financial planning profession, uses a “corny” approach to helping people prioritize their spending. He uses flash cards with each flash card starting a long-term or short-term spending idea. His cards include such things as: paying for a child’s wedding, acquiring a new boat, buying a vacation home, paying for a grandchild’s education, funding a significant gift to an alma mater, increase tithing to my church, saving for retirement, etc. He asks his clients to go through each of the 100+ cards and put them in the short-term pile, long-term pile or discard pile. He gives a set of cards to each spouse of a married couple. Then, they are asked to prioritize their goals. This “corny” strategy is something that people make fun of, but it certainly works in getting people to make a commitment to a goal.
- Identify and manage “road-blocks.”
Death and Disability are just some of the barriers to reaching goals. Purchasing insurance to minimize the losses is essential. Ask your Western Fraternal Life agent about managing barriers to your financial success.
- Align your spending with your goals.
Does your current spending pattern align with your financial goals? Can you eliminate the extraneous expenses that don’t align with your values? Are you willing to drive a 10-year old car so that you can save for your child’s education? Are you willing to give up eating lunch out every day so that you can put money away for retirement? Reevaluating how you spend money is a key source in finding money for those things that are most important to you.
Regardless of the approach you take to prioritizing goals, managing barriers, and realigning spending to reaching your goals, it is not easy to change habits. Sitting down with a financial planning professional who will make you accountable for your spending could be the key to your financial success.
CFP®, FLMI, Annuity Product Manager
Want some tips to cool your wallet this summer?
You've come into money through an inheritance, sale of property or the lottery! Now what should you do?