Tuesday, 26 Feb 2008

The Second Step to Financial Success

2/27 – Edited to add a great link about selecting disability insurancehttp://www.getrichslowly.org/blog/2008/02/27/the-disability-insurance-maze-how-to-select-and-purchase-a-policy/

Yesterday, I discussed the first step to financial success. Click here for that post. Now that you’ve defined your financial mission, the second step of your journey is to establish goals. Your goals can be short-term (within five years) or long-term (five years or longer). The goals you set should be those that will allow you to achieve your financial mission. Writing down your goals will help you prioritize your spending when it comes time for you to chart your course. Generally speaking, your goals will fall into one of five categories.


  1. Insurance planning -Insurance is necessary in order to reduce the risk of a catastrophic loss. This includes, but is not limited to, auto insurance, homeowner’s/renter’s insurance, health insurance, life insurance, disability insurance and long term care insurance.
  2. Tax planning -The goal of tax planning is to minimize income tax liability as well as take advantage of available incentives such as tax credits, tax deductions and tax-deferred or tax-advantaged accounts.
  3. Retirement planning – The goal of retirement planning is to accumulate sufficient capital to provide adequate income for your predicted life expectancy.
  4. Investment planning – Investment planning is key in order to amass assets and resources in order to fund retirement, inheritances as well as other expenditures such as home purchase, college. etc.
  5. Estate planning -Last, but not least, estate planning allows for your wishes to be realized as it applies to your heirs or other parties to whom you wish to transfer funds.

While these categories may seem different, your goals are all interdependent. Keep in mind that goals are high level statements. You will refine them and be more specific in the next step, which is defining objectives. Stay tuned for tomorrow’s post which will address that.

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