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An excerpt from Talking Money: Everything You Need to Know About Your Finances and Your Future (Warner Business Books, 2000) by Jean Sherman Chatzky.
Before you can begin putting a financial plan into action, you need to identify your goals. Ask yourself and your partner these five questions to get you started.
1. What do I want to accomplish financially this year? Don't censor your answers. They can be anything from "I want to spend winter break in Boca," to "I want to have $1,000 in my savings account," to "I want to pick better stocks." All are acceptable. Just be sure to list accomplishments that are possible to achieve in the next 12 months. Red Flag! Don't allow yourself to be wishy-washy. Being specific is key. Otherwise, a year from now you'll still be starting from scratch.
2. What do I want to accomplish with my money in the next 10 years? Again, be very detailed. Perhaps you envision having $30,000 in your IRA or 401(k) by that time. Perhaps you can see yourself having zero in credit card debt. Or maybe you'd like to be working for a company that grants stock options. Knowing what you're striving for makes the path toward those goals easier to find -- and therefore easier to follow.
3. What do I want to accomplish with my money far off in the future? These are your stretch goals. They may include retirement at age 55, a second career in the Peace Corps, or the ability to leave your kids a sizable inheritance. One of my colleagues at Money magazine, Jason Zweig, says his long-term investment time horizon is 100 years. No, he's not expecting to break the Guinness Book records for longevity, but he has children and he's planning to leave certain investments to them.
4. Am I willing to begin? There is only one thing standing in the way of achieving your goals -- at the very least your short-term ones -- and that's you. Are you willing to do it? Perhaps you decided you want to save an extra $1,000 this year. Are you willing to cut your spending by the $20 a week it'll take to accomplish that? Or to take on a freelance project or some overtime? Are you ready to do it today? When it comes to your money, procrastination can be a killer.
5. Do I know how to get started? The key is to break that goal down into smaller chunks that you can wrap your hands around. Take that $1,000 example. As one sum, it sounds like a lot of money. But when you realize saving it on a weekly basis only means socking away a $20 bill, it's manageable. If you want to buy a house five years from now and need to come up with a down payment, you're working with larger sums of money -- but they can still be broken down into manageable parts.
Money is the biggest source of arguments in a marriage -- that's a fact that has been documented numerous times, including in studies from Citigroup, Worth magazine, and the Prevention and Relationship Enhancement Program (PREP). And according to California-based financial planner Victoria Felton Collins, author of Couples and Money (Gabriel Books, 1998), money is the driving force in divorce a whopping 90 percent of the time.
In fact, therapists say it's harder to talk about money than it is to talk about sex. Why? In part, it's because talking about sex in the safe-sex era has gotten easier. Talking about money hasn't. But just as we learned to ask about condoms and HIV testing, we can learn to ask about spending habits, financial goals, and credit card debt. It's a matter of diving in. And for that, it helps to have a bit of a script (at the very least you need a good opening line). Here's how to get off on the right foot.
Sometimes you just need something to say to get the ball rolling. Try:
Copyright 2001 by Jean Sherman Chatzky. All rights reserved. Excerpt posted with permission from Twbookmark.com.