The importance of goals-based financial planning at any age or income
Financial planning

Fail to plan and you plan to fail. Sure, this is a cliché, but it’s fundamentally true and especially when it comes to your finances. Having a simple plan to protect ourselves in case of emergencies or to build wealth for retirement is one of the most important and beneficial things you can do to lay a foundation for a secure future. Yet many of us are more organized about our grocery lists than our savings and investments. 

No matter how much wealth you want to build or how little you might be starting with, setting out strategic financial goals to help you achieve the life milestones that matter to you the most is key. At any age, with any income, here’s how to get started. 

(One thing before we get started: If you’ve got high interest consumer debt, most likely a credit card or loan, then paying that off first is your #1 priority. Yes, you also need savings and investments, but first you need to get off the slippery slope of paying off your debt. The rest of this article, we’ll assume you’re relatively free of high-interest consumer debt.) 

Create a long-term financial mindset

If you’re reading this article, that probably means you’re at least a bit curious about how you can make this work for you. But you might also already be falling into the trap of thinking that none of this really matters to you because you can’t do it. That you don’t have enough money, or time, or both, to make a real difference in your life. Don’t sell yourself short like that. 

You might be thinking that none of this really matters to you. A lot of us put off financial planning for a variety of reasons: it stresses us out, we think we don’t have enough to make a real difference, we’d rather think about serious stuff another time. Those are all fair enough, but in the end will all take you to the same place: financial insecurity. You want to start with how you think and feel about money, and follow that with what actions you should take. 

1. You’re younger but worried you don’t have enough money to make a difference. When it comes to investing, time is your friend. It can feel like there’s pressure to invest significantly or what’s the point? There are actually two important points here — one is financial and one is psychological. 

By consciously, proactively setting any goal and contributing to it you’re building a mental mindset of taking control of money and planning for the future. That will make it automatically easier to level up in the future if or when you start to make a larger salary or have more to invest. 

Start here: If you don’t have a saving account, the #1 thing you need to do is begin to build an emergency fund that could cover you for six months of expenses. Set up a separate savings account that automatically withdraws an amount — no matter how small — and deposits it to your savings once or twice a month. Even if it’s $5. This is more about getting you into the mindset of savings and seeing that automatic withdrawals can build your emergency fund without you noticing than it is about the actual amount. 

2. You’re older but worried you don’t have enough time to save anything substantial. I’m going to use another proverb here. “The best time to plant a tree was 20 years ago. The second best time is now.” 

Yes, it’s true that starting on your financial goals a few decades ago would have been easier in some ways. But for whatever. reason, you didn’t. Some of those reasons are probably pretty valid, and thinking about what you could have done won’t help you now. In fact, it might lead you to beat yourself up about how you failed and make you less likely to take action now. That’s the opposite of what we want. 

The second best time to start is now, and focus on what’s still possible. While saving more aggressively will definitely help to make up for some lost time, with even a 5-year timeline you can make gains on your savings and investments that you wouldn’t have had before. This is where you want to work with a professional advisor to maximize what’s possible but not put your savings at risk, particularly if you’re close to retirement. 

3. You’re any age and just too stressed to think about any of this. Okay, fair enough. It’s not uncommon to carry a lot of emotional baggage, even shame, around finances. It’s easy to find yourself in a cyclical trap of thinking “I don’t save, so I’m incapable of saving. So I don’t that must mean I’m incapable of saving.”

Long-term planning is highly psychological, and part of taking the first steps is believing that you can succeed. Start by taking one positive action and framing your future potential around that. Tell yourself “I saved $10, so I’m capable of saving. So I do save...and that means I’m capable of saving more.”

Pick step-by-step processes you can stick to

As humans, we’re really bad at prioritizing short-term rewards over long-term rewards. Neurologically, our brains just aren’t naturally wired that way. We have a cognitive bias to want the thing that will satisfy us right now, even if it’s at the expense of having more of that exact same thing later. Remind you of any bad habits you have? Say, with money?

When it comes to your financial habits, sustainability is key. Just like starting a healthier eating or workout plan, if you try to do too much, too quickly, you’ll fail. Small, positive actions over a longer time horizon add up to a major change. Resist the urge to calculate a budget and schedule all of your disposable income into savings, or act as if you won’t ever want to treat yourself again. 

You will, and when you do you’ll deserve to. Especially if you’ve been financially in control and know when it’s time to spend that you can do so without negatively impacting your long-game goals. That’s the beautiful thing about thinking about the future — it also enables you to enjoy the present, too, but in a guilt-free way that also smart financial planning. 

Be long-term adaptable

No long-range plan is going to be perfect, and you shouldn’t expect it to be. You don’t know what you will want or need in 10, 20, 30 years. You can predict it, and you know it will be a good idea to have investments to support you when you get there. But that’s about it. 

You’ve probably heard about advice to “focus on the long-term,” and that’s still a solid rule of thumb. But you don’t want to forget also being adaptable to change. Within the framework of your lifelong financial goals there’s a lot of room for flexibility. Our lives aren’t black and white, and we don’t do things completely perfectly or imperfectly. You shouldn’t think about your money management habits in that way, either. Black-and-white thinking leads to perfectionism and shame, two things that won’t help you become more financial independent. 

Follow the theories we’ve talked about to adjust your mindset towards money and your lifelong financial goals. Start with positive, kind, compassionate thinking toward yourself and you’ll find taking those first small but crucial steps easier. The more steps you make, the more confident you’ll feel and the more habitual they’ll become. Sooner than you might think, you’ll have established goal-based financial thinking that will serve you for years and decades to come.

Jeremy Elder is a paid Sonnet spokesperson.
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