Setting financial objectives for you and your spouse is an important part of planning for the future as a newly married couple.
Goals are critical to financial success and are a fundamental part of the financial planning process. After all, if you don’t have goals and objectives, what is the point of financial planning in the first place?
Financial goals can address your immediate needs, your long-term dreams and everything in between. As newlyweds, you may be starting to think of things like starting a family and how to pay for your children’s college. Or, you may be determining if you are ready to put a down payment on a house. At this point, careers may become more stable, allowing you to approach these major expenses.
Setting financial objectives doesn’t have to be a complicated process. We’ve outlined three key steps to help you get started:
Step 1: What do you have?
When thinking about setting financial objectives, you need a clear understanding of what your current financial situation is.
A good place to start is to determine how you are currently spending your money. Use online tools to track your spending for one month. This will give you a good idea of what you are currently spending your money on and what your wants versus needs are. It can be an eye opener for many people!
Once you’ve gotten a better understanding of your spending, analyze your cash flow and determine your net worth. To calculate your cash flow, make a list of your monthly income and monthly expenses. Then, subtract your expenses from your income. For information on how to determine your net worth, review this Hands On article.
You should also assess your debt and determine how long it will take you to pay it back.
Step 2: What do you want?
With a good picture of your current financial situation, you can now determine what broad financial goals and specific objectives you want to reach in the coming months and years.
When you’re setting objectives, remember to keep three things in mind:
- Be specific
- Be measurable
- Be realistic
- Set a time frame
For example, “I want to be rich” is not an effective objective. It’s a wish. Instead, focus on specific objectives such as these:
- I want to pay back all of my student loans ($25,000) by the time I am 30 years old.
- We want to save up $100,000 to pay for our child’s education by the time he is 18 years old.
- I want to save $10,000 for a house down payment over the next 24 months.
Step 3: How do you make it happen?
Utilize the information you discovered about your financial situation and your hopes and dreams to create a well thought out plan that will help you reach your financial objectives.
Create a timeline, whether by the week, month or year, to help you reach your objectives. For example, for the down payment objective above, you will need to save an additional $415 per month. By breaking out the amount into specific timeframes, it will make it much easier for you determine whether you are staying on track or not.
Properly planning and strictly adhering to your timeline will make meeting your financial objectives much easier and more realistic. Your MidWestOne banker or financial planner will be an invaluable tool to help you create your plan.
Setting financial goals and objectives are valuable because they allow you to make measurable financial progress and help you and your partner stay on track financially. Take some time to get started today!