5 Simple Steps to Reaching Your Financial Goals

Setting financial goals is as important as regularly saving money and investing and takes on a key role in the financial planning process.

Aug 16, 2014 at 10:30AM


Photo Credit: American Advisors Group

Investors should never underestimate the importance of setting financial goals.

Goals really add meat to any financial plan and also hold the investor accountable to his progress. As long as financial goals are realistic and measurable, investors are already more likely to achieve them. This is because goals lend focus to an investor's saving and investment efforts and visible progress actually is quite motivating.

In order to achieve your financial goals, independent of what they are, you don't have to do much more than to follow the five steps below:

1. Gain clarity about your financial goals
Once you know what you really want to accomplish (such as buying a house or traveling or accumulating a sufficient retirement portfolio), you are already on the right track. Our world offers a lot of opportunities, but also a lot of distractions. Be sure that what you think you want is what you really want.

Once you have clarity about your financial goals, put them in writing and hold yourself accountable to them.

2. Distinguish between primary and secondary goals
This is actually easier to accomplish than many would think.

We all have a set of goals that we either directly or indirectly pursue, many of which might even be in conflict with each other. For instance, you could plan to retire at 60, but also like to travel around the world before you retire.

If you indeed traveled, you probably wouldn't have the resources to save and invest for your retirement. Quite the opposite might be true: Because traveling implies spending a lot of money, it could even set you back in your retirement planning.

You have to prioritize: Which goal is more important to you, a short-term goal or a long-term goal? I would always advocate for making long-term goals such as saving for retirement a primary goal and keeping secondary goals such as consumption in the back of your head.

Once you have attained the resources to comfortably fund your primary goals, move up the pyramid and see what your secondary goals are. That way you ensure funding your most pressing needs, but also consider less important financial goals such as traveling.

3. Start
If you don't start saving money and investing it, you won't accomplish much with a piece of paper that spells out your financial goals. You have got to start and put money away on a regular basis in order to get the ball rolling.

Persistence is key here: If you continue to save on a regular basis and invest your money in quality companies with well-known brands, you should do reasonably well over the long-term.

4. Diversify
Don't put all your eggs in one basket. Diversify and don't lose your money.

Many investors rush into the stock market only to be disappointed because the stock market follows its own rules and guiding principles. Long story short: Spread your funds over multiple investments and you should be well on your way to reaching your financial goals.

5. Monitor
Review your financial goals as well as your investment portfolio regularly. Are your financial goals still valid or do you want or need to adjust them? Regularly reviewing your financial goals and monitoring your investment portfolio are powerful tools to further gain clarity about what you really want out of life and how well you are doing in terms of achieving your goals.

The Foolish Bottom Line
As with anything else in life, reaching financial goals is more a practice of rigorous planning and following through.

Once you have gained clarity of what you want, put your goals in writing and hold yourself accountable to reaching your goals. Save money regularly and invest in quality companies in order to benefit from capital returns that can help you attain your financial goals even quicker.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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