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      "Achieving Happiness, Prosperity and Financial Freedom in your Life!"

Make a list of your objectives.
You may not be able to achieve every financial goal you've ever dreamed of, but you can achieve the most important ones if you identify them clearly in your own mind and decide which are most important.

Focus first on what’s most important to you
To accomplish primary goals, you will often need to put equally desirable but less important ones on a back burner.

Be prepared for conflicting goals
Even worthy goals often conflict with one another. When faced with a conflict between goals of equal importance, you can sometimes choose by applying criteria like: Will anyone's health be affected by my choice? Will one of the conflicting goals benefit more people than the other? Which goal will cause the greater harm if it is deferred?

Time is on your side.
The most important ally you have in meeting long-term goals, like preparing for retirement, is time. The reason, of course, is that money stashed in a savings account or invested in stocks, bonds or mutual funds usually grows over time. Sometimes substantially, to help meet your needs.

Choose your goals carefully.
In drawing up your list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Once you have your list together, you need to rank the items in order of importance.

Include Your Family When Setting Goals

If you have a spouse or significant other, make sure he or she is part of the goal-setting process or you will probably regret it later. Children, too, should have some say in goals that affect them.

Start as soon as possible.
The longer you wait to identify and begin working toward your goals, the more difficulty you'll have reaching them.

Focus on the big goals.
Once you have prioritized your list of goals, keep your spending on course. Whenever you make a large payment for anything ask yourself: "Is this taking me nearer to my primary goals or leading me farther away from them?" If a big expense doesn't get you closer to your goals, try to defer or reduce it.

Don't worry about the small stuff.
Although this lesson encourages you to focus on big-ticket, long-range plans, most of life is lived in the here-and-now and most of what you spend will continue to be for daily expenses -- including many that are simply for fun. That's okay, so long as your long-range needs are also provided for.

Always be prepared for change.
Life is all about change! Your needs and desires invariably change as you age, so you should probably reexamine your priorities at least every five years.

Identifying Goals

Unless you win the lottery, you probably won't achieve every financial goal. But you can go farther than you think if you focus on what matters most.

What is your most important financial objective?
Most people, when asked that question, they voice fantasies that probably can't be achieved at all, like doubling their income overnight, retiring at 30, or winning at Powerful.

The fact is, most of us have never spent much time thinking in a systematic way about which financial objectives matter most. Instead, we muddle through our financial lives, occasionally setting aside money for important long-term needs. Like savings, investments, or insurance, but more often just spending to meet the day-to-day expenses that always clamor for attention. There's nothing terribly wrong with that approach, except that it risks leaving the most important objectives unfulfilled.

This is very important! This section is about helping you to choose which financial goals matter most so that you can make sure they happen.

That's not as easy as it sounds, since financial goals, even worthwhile ones continually collide with one another. Paying for a child's braces may rob money that would otherwise go into his or her college fund. And saving effectively for college often wipes out any hope of putting adequate money aside for retirement, to say nothing of bills that you or a spouse could face to help care for an aging relative. Choosing among important expenditures like these can be truly agonizing.

That's why to get what you want 1) You must decide which goals will take precedence, and 2) work toward the lesser goals only after the really important ones are well provided for.

Fortunately, when it comes to meeting your long-range goals, you have time! That's an advantage, of course, because of the power of compounding, the fact that small amounts of money, properly invested over long periods of time, can grow into a significant sum. Suppose you put aside only the cost of a single candy bar, about 65 cents each day. Invested in a tax-deferred account paying 5 percent a year, that string of savings would grow to $3,079 in just 10 years and to $16,521 in 30 years.

To put the power of compounding on your side, though, you have to start early.

Make a list of all the things that you'd need to feel secure, happy or fulfilled. These can range from the weighty (getting out of debt) to the luxurious (a Lamborghini, say, or a cruise to Bali). You don't need to prioritize them yet. That comes later. But you should try to get down all of the money-related things that will really get your motor started. And if you have a spouse or significant other, it's a good idea to do this exercise together, assuming you think your relationship can survive it! Here are some of the less frivolous items that you may want to include among the possibilities:

• Accumulating enough savings to handle an emergency

• Buying a house large enough to accommodate you comfortably

• Getting out and staying out of debt.

• Ensuring that your parents are comfortable and well taken care of in their old age

• Paying for your children's college education

• Investing with the aim of becoming financially independent

• Amassing enough wealth to retire comfortably

Once you have your list in hand, move on to the next section where you'll determine which of these goals are most important to you.

Setting The Plans In Motion

Now that you've identified the right goals, here are examples of some game plans that will achieve them.

Assuming that the earlier parts of this lesson have helped focus your attention on your main priorities, here are examples of plans you might draw up to meet three of the most common objectives: getting out of debt, paying for college, or financing a retirement:

Getting out of debt
If you struggle to meet credit-card payments every month, then face it: You probably need to shed or consolidate some of that debt. For example, suppose you owe $3,000 in outstanding credit-card debt at a 16 percent interest rate and a $10,000 car loan at 9 percent. To pay off both these obligations in a year, you'd need to pony up $1,150 a month. But if you are a home owner with equity in your property, you could borrow $13,000 on a home-equity loan at the same 9 percent and retire those other bills. Then your cost to pay off the home-equity loan in a year would be lower ($1,140 a month), because you're no longer paying high credit-card rates of interest. Moreover, because you can deduct the interest on most home-equity loans, you'd reduce your taxable income by $680 that year, a $210 saving for someone in the 31 percent federal tax bracket. In effect, the government would help you pay off your nagging expenses.

Of course, this kind of strategy works only if you stop putting new charges on your credit cards at the same time. This principle seems obvious, but it's where most people fall down.

Paying for college
Tuition, room and board at a private college costs around $30,000 a year today, and that bill is projected to reach $78,000 (based on projections by T. Rowe Price) by the time this year's crop of newborns are entering college 18 years hence. Your children may qualify for financial aid either in the form of a scholarship or a loan, and many students work their way through college. But if you want to spare your kids the burden of graduating in debt, most states offer education savings accounts in which after-tax contributions grow tax-deferred until they're used to pay college tuition, when the withdrawals are taxed at the child's minimal rate, rather than at the parent's rate. You could also open a federal Education IRA that lets you put $500 a year, after taxes, into a bank account or other investments; earnings on that type of account are totally tax-free, provided the money is used for tuition when it's withdrawn.

For example, a $10,000 zero-coupon bond that matures in 18 years issued by a U.S. corporation recently cost around $3,350. Best of all, you can buy bonds that will mature in years when a child's tuition payments will be due.

If you keep in mind that being able to pay your newborn's college costs is more important to you than, say, driving a luxury car, then stick with a family car instead. Let your priorities direct your discretionary spending.

Financing a retirement
A popular rule of thumb claims that retirees need only 70 percent of their pre-retirement income to maintain their lifestyle, since they no longer have to pay for commuting or for work clothes.

In fact, however, other costs go up in retirement, such as utility bills when you're home all day, the price of hobbies and other diversions and, of course, the cost of health care as you age. Some retirees find they need as much income in retirement as they spent while working.

Unfortunately, traditional pensions pay only a fraction of your salary, and Social Security won't make up the difference. In addition, the younger you are, the less certain you can be about how much money you'll receive at age 65 from any of the retirement plans you have today. Why? Because Social Security benefits may be revised -- and employers are free at any time to change their pension-plan formulas. (They can't do so retroactively -- every retirement dollar that you've already qualified for is yours to keep. But employers may legally alter the calculations they use to determine the retirement benefits a worker's salary will earn in the future.) And of course, Congress can change the laws governing retirement savings plans at any time.

So to make your retirement finances secure, you need to contribute to as many different plans as possible. If you have a 401(k), 403(b) or 457 program at work, put in as much money as you can. Most employers will match your contributions, giving you money for retirement that you won't get any other way. If you have no retirement plan at work, contribute to an IRA. Note that contributions to all of these plans are tax deferred, so that you, Uncle Sam and your boss together could be adding to your retirement stash.

Then to insure against possible new retirement-plan rules mandated by Congress, you need to have your own taxable savings plan as well ideally invested in stocks, bonds, or mutual funds which generally return more than bank accounts. Best of all, as your investing account grows, it can help you finance other goals as well.

 
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