When my daughter was in elementary school, I got her a Moon jar \u2013 a foldable bank with three compartments labeled \u201cShare, Spend, Save.\u201d Moon jars were created to help kids learn about money and goal setting. I encouraged my daughter to sort her money \u2013 allowance, earnings from chores, and gifts \u2013 into three categories and make a plan for how to use it. The Spend slot is for short-term wants, Save is for longer-term goals, and the money put into Share is for helping others. It\u2019s a simplistic form of a financial plan. A way for young kids to connect goals with the means to make them a reality.<\/p>\n
I started giving my daughter a small allowance when she was old enough to do simple arithmetic. When we went to the toy store, she had to make decisions whether she wanted to spend her money right away or save it for something bigger. She learned early on that money isn\u2019t everything, but it could help her get the things she wanted.<\/p>\n
Of course, as we get older, money gets a lot more complex. We have to balance earnings, savings, and investments with expenses, needs, wishes, and yes, taxes. We must plan for today and the future. But these are all very personal decisions. And that\u2019s where goal setting comes in.<\/p>\n
As adults we have goals that are both practical and aspirational. Some people talk about their goals or write them down. Others keep them to themselves. Personal goals can range from improving health and happiness to retiring early or switching careers. Not every goal has a financial component, but for those that do, the money part needs to be addressed.<\/p>\n
Setting and working toward goals can also be a great way for couples and families to communicate. Shared goals help prioritize how families will spend their precious resources \u2013 whether that\u2019s money or time. Goal setting takes hopes and dreams and turns them into a plan.<\/p>\n
It turns out that setting specific goals makes it more likely they\u2019ll be achieved. Whether you\u2019re setting goals as an individual or a family, the more tangible your plan, the more likely you are to see your goals become reality.<\/p>\n
A useful framework for creating goals is to follow the SMART model. SMART is an acronym that stands for Specific, Measurable, Aggressive, Realistic, and Time-bound. A specific goal has details. For example, rather than saying you\u2019d like to go on more family vacations, you could set a goal to budget enough for out-of-state travel once a year. The only way to know if you\u2019ve achieved your goal is to make it measurable. If it\u2019s a financial goal, you should be able to define how much you plan to share, spend, or save.<\/p>\n
The third letter in the SMART acronym is aggressive. Aggressive doesn\u2019t mean un-achievable. But there\u2019s really no sense in goal-setting if it\u2019s something that would happen anyway. Goals also need to be realistic. Your financial goal might take some discipline and perseverance, but it shouldn\u2019t rely on winning the lottery.<\/p>\n
And finally, your goals should be time-bound. Deciding when you want to achieve each of your goals gives structure to your plan. By defining goals that are specific, measurable, achievable, realistic, and time-bound, you\u2019ve got a roadmap for where you want to go and how you\u2019ll know when you get there.<\/p>\n
Goal setting isn\u2019t just about planning for big things like a house, college, or retirement. It should take into account more immediate things too, like supporting a hobby or family interest. In fact, your big-picture plan includes all these things, so you know where to focus your energy and resources.<\/p>\n
My daughter is now a college student, and I haven\u2019t stopped giving her advice. Lately everyone is asking what she wants to do when she graduates. She has aspirations but I\u2019ve suggested she should also be open to changing her plans. After all, sometimes a new opportunity comes along, or there may be an unanticipated twist in the road.<\/p>\n
Having a personal financial plan helps you focus on your goals so they\u2019re more likely to become reality. And having a relationship with your financial planner means you can keep evaluating your plan to make sure you\u2019re on track to meeting your goals.<\/p>\n
Questions to ask yourself:<\/p>\n
Action Steps:<\/p>\n