It goes without saying that the biggest savings goal you're likely to ever have is retirement. But it's probably not the only one. Life is full of wants and needs, and some of them are expensive. Most people can't write a big check for a wedding, a new home, college tuition, or to launch a business without putting money away first.
So what do you do when you need to save for retirement and meet other important milestones along the way? You plan for it.
Like the map app on your phone, financial planning can help you find the right way to your destination. You'll have choices when it comes to how you get there and where you stop along the way. And sometimes, there might be detours. A good financial plan starts with your goals, but you can adjust it as conditions change.
When you have multiple goals and a budget that only stretches so far, every goal can't be the most important one. Financial planning helps you prioritize based on importance, cost, and when you want to reach each goal.
For most people, retirement is up there at the top. After all, you could need your nest egg to last 25 to 30 years, or longer. And the earlier you start, the easier it is to reach your goal.
Besides retirement, what matters to you might vary depending on your life stage, family needs, and other considerations. When you're starting out, paying off high-interest credit cards or student loans, building an emergency fund, and saving for your first home might come next. Later, the most important thing could be long-term wealth and security for your family.
Planning helps you put your goals in writing, so you can stay focused on what you want to achieve. As new goals enter the picture, it also helps you figure out which ones you can afford given your income, expenses, and time horizon. And you can reprioritize, if you need to.
In addition to helping you estimate the costs and timing to reach each goal, a good financial plan includes personalized action steps to help you keep your goals on track. Often, these are determined by going over your goals and budget with a financial planner to consider different ways of getting where you want to go. This can be especially helpful when you have competing goals.
Take education, for example. Once you have kids, you might feel pressure to cut back on retirement savings to put money away for their college years. But an action step from a planning session could suggest specific ways to reprioritize or augment your budget, so you can make progress on both goals.
You might find you have more wiggle room than you thought in managing your costs. Or you might be inspired to supplement your income, investigate scholarships, or start saving earlier, since more time allows your money more potential opportunity to grow.
Adjusting as you go
Let's face it—life comes at you fast sometimes. What's important to you today might not be so important tomorrow. You might face expenses or losses that weren’t supposed to be part of the picture. Or you might have an unexpected windfall and be able to reach your goals faster and add new ones.
To help you manage the twists and turns, a good financial plan will let you adjust your goals and priorities as they change—and get personalized help to update your action steps when you need to.