Setting financial goals

Achieving financial security begins with setting organized financial goals. Goals to be achieved within the next year or so taking a spring break vacation, for example are short-term goals. Long-term goals involve plans that are more than five years off, such as saving for a college education.

In order for financial goals to be useful, they must be:

• Realistic: Base financial goals on your income and your situation. For example, buying a new car each year is probably not a realistic goal for a full-time student.
• Stated in specific, measurable terms with a set time frame: Identifying specific goals will help you create a plan to achieve them. For example, the goal to ’’save $500 over the next year to buy a new television,’’ is much clearer than to ’’save money for a new television.’’
• Covered in your budget: Whatever amount you want to save, make sure to include it when creating your budget. One sure way to start saving is to deposit a set amount or percentage of each paycheck into your savings account before spending money on anything else.

Types of savings plans

Along with setting financial goals, determining the best method for saving or investing your money is extremely important. A variety of savings plans are available, including regular savings accounts, money market accounts, and certificates of deposit.

In order for financial goals to be useful, they must be:

- You deposit money whenever you want.
- You may have a passbook that shows your balance. Or you may get a regular statement from the bank.

- You deposit a fixed amount every week.
- The account helps you save for a special purpose, like gifts or vacations.

- You deposit $500 or more
- You agree to leave the money for a certain period (from one month to five years).

- You deposit a large amount to open the account.
- The bank pays you interest based on the money market.
- You can write a few checks each month.

Types of investments

Investing takes basic saving a step further. Bonds, stocks, mutual funds, real estate, and retirement accounts are smart investment options.

• Issued by U.S. government
• Sold at most banks
• Don’t require a lot of money
• No risk

• Investor buys with lump sum payment
• Annuity pays you regularly in the future
• Most often pays off during retirement
• Often non-taxable until payments begin
• Low risk.

• Group of stocks, bonds, and other investments managed by investment experts
• Each investor buys shares in the fund
• Fund regularly pays profits to investors
• Investors can sell shares to make a profit, but may lose money if value has decreased
• Levels of risk and return vary

• Investor loans money to government or corporation that issues the bond
• Bonds take five to twenty years to mature
• Low to moderate risk

• Investor buys shares of ownership in corporation
• Stocks rise in value when corporation does well. Stocks may decrease in value
• Success requires knowledge of the stock market
• Risk varies

• Investor may make money by buying property and renting it out
• Investor may make money by buying property and selling it for a profit
• Moderate to high risk

• In some retirement plans, your employer makes contributions in your name. In others, you contribute to a company plan.
• The plan invests the money
• When you retire, the plan pays you. You may get regular payments over time. Or you may get one lump sum payment.

• Special accounts with banks, brokerages, or mutual funds. They’re designed to help you save for retirement.
• You can save a percentage of your income
• You can choose where your money is invested
• You don’t have to pay taxes on the interest until you retire
• If you withdraw money before you’re 59¬O, you have to pay a penalty

• Special accounts set up by your employer
• Put a percentage of your income in the account. Your employer will often match your contribution.
• You can have your contribution taken right out of your paycheck.
• If you withdraw money before retirement, you may have to pay a penalty.
• You don’t have to pay taxes on the contributions or the interest until you begin withdrawing money.
• The plan usually offers several investment options with varying levels of risk. You can choose which ones to put your money in.