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Set Your Financial Goals

Just as in other aspects of your life, setting financial goals is a tried-and-true way to reach those goals.

You can create a list of your financial goals on your own or you can work with an investment professional who has experience in this area. To make the most of this exercise, assign each of your financial goals a price tag and a time frame. Then, identify the kinds of savings and investing strategies that may be appropriate for meeting your goals. 

One advantage of working with an investment professional is that he or she may provide the encouragement you need to move from thinking about your goals to actually listing them out, and taking steps to achieve them.

While everyone's circumstances are a little bit different, there are essentially four steps to creating a strategy for meeting your goals that will work for just about every person and situation:

  1. Identify your most important short-, medium- and long-term financial goals.
  2. Estimate how much each of your goals will likely cost.
  3. Set up separate savings or investment accounts for each of your major goals.
  4. Choose investments suited to meeting each of your goals based on your time frame and your tolerance for risk.

Before you can choose investments to meet a particular goal, you need to have an idea of what the goal will cost and your time frame for meeting the goal. 

It's relatively easy to anticipate the costs of short-term goals, since they probably won't be significantly different from what they are today. Estimating the costs of goals that are further in the future, especially major ones like the cost of college or retirement, can be a bit trickier. FINRA’s College Savings Calculator and Retirement Calculator can help.

For goals that are more than a few years away, you also need to consider the impact of inflation on your assets—something you can figure out using an online calculator. Historically, inflation has averaged about 3 percent per year. And the costs of tuition at both public and private colleges typically rise even faster. That means you'll have to earn enough on your investments to offset these rising costs.