If you are working with a financial advisor, the question about your financial goals would be among the first ones she would ask. It is a good practice to outline your goals so that you can then keep track of your progress towards achieving them.
You might know the answer on top of your head. No worries if not – let’s look at some of the most common (and then less common) financial goals you can consider. In case you are married, it’s important to come to the same page with your partner about these goals. It might not happen overnight as your point of views might be different and some conversations might get uncomfortable, so be patient with it.
As with everything financial planning related, the goals can be categorized by their time horizon: long-, medium- and short-term.
Long-term goals: These are the goals for the retirement. It is the hard nut to crack with many unknowns such as longevity, when and where you would eventually retire. However, you should have some idea about what could work for you and what lifestyle you can envision after retirement.
It is important to include the healthcare expenses in your retirement goals. While many mistakenly think that Medicare is free, for most Americans, healthcare will be among top-3 expenses in retirement. Fidelity Investments estimates that a couple retiring today will spend on average $285K out of pocket on the healthcare in retirement. Add on top the healthcare inflation that has historically outpaced the overall inflation rates.
Medium and short-term goals:
Consider the following most common goals:
- Building an emergency fund
- Buying a house and saving for a down-payment
- Paying for children’s education
- Home renovation, big reunions and vacations
Other goals to consider:
Providing for aging parents or supporting extended family.
Caring for aging parents could have a variety of financial consequences. You might need to help your parents financially with the long-term care. You might move your parents into your home and invest in making necessary adjustments to your house as well as anticipate an increase in daily expenses.
Also, it can take a toll on your income and savings if you reduce the working hours, drop to a part-time status and potentially lose employer contributions to 401K.
Start a business. If you dream of going on your own at some point of time – this is exciting! Yet, you might need to account for an uncertainty of future earnings.