Return to home page

Financial Security by Design

Goal Setting

It's straight forward enough to write down broad objectives. For example,

• Live long and well;
• Pass your wealth to your children; and
• Abolish hunger and war.

The challenge is to translate these concepts into quantifiable goals. You need to work through questions like the following.

• Are you satisfied with your current standard of living? If not, how do you want to change it? How might you effect this change, when might change occur and what might it cost?

  (By the why, what are your present living expenditures and which of these are discretionary?)

  How long will you live or, more precisely, for how many years do you wish to make financial provision? Where will you live? What is your current income? How will your income change in the future? Is your job secure? When will you retire? What will you receive in the way of Social Security and other retirement benefits?

  What happens if you or your spouse were to die prematurely, or become ill or disabled? What about your children's education? Who will be your children's guardian if you die or become disabled? Who will be your guardian, should one be required? Should you make special provisions for an adult child or someone else dependent upon you?

  How will your cost of living change in the future? What about special expenditures late in life, such as burial or long term care? What should be assumed about taxes?

• What are your present assets? What about your investment portfolio; specifically, what are your expectations for return and risk? Are these expectations realistic? Has performance been up to expectations? Why or why not? Is your portfolio adequately diversified and is there coordination between your taxable and tax deferred accounts? Do you need more knowledge or professional assistance to better manage your portfolio?

  What is your stock option strategy? Are you making appropriate use of pension opportunities? What is your plan for getting cash out of a rental property or a small business?

  Do you intend to consume everything you have by the time you die and, if so, how? Have you decided to whom you will leave your wealth and personal mementos? Who are the beneficiaries of your pension accounts? Do you know how to distribute your assets with minimum tax and legal fees? Should you distribute some assets before death? Are the appropriate documents in place to effect your wishes? Name these documents. Should the documents be reviewed? Who is your executor and who are your trustees?

• What, specifically, can you do to leave the world in better shape than you found it? Will you contribute skills or time? How will you make the time? Will you contribute financial resources? How much, to whom, when, how? Are interested in current financial benefits from future charitable bequests?
• Do those close to you know your answers to these questions? Should they know? Are they supportive? Do your differences matter?

The role of the adviser is to assist your goal setting through disinterested coaching.

The next task is to develop a specific action plan. Your plan might be to develop a budget over the next month, to rebalance your portfolio over the next year, to purchase disability insurance immediately or to talk to your attorney next week about changes to your legal documents. It may be desirable for your adviser to take a comprehensive look at the financial implications of your goals before an action plan is developed. Few of us are able to do all that we hope and you will probably need to establish priorities.

We live in an uncertain world. Goal setting should be a living process rather than ending upon implementation of the action plan. Progress should be monitored so that you can respond to threats - and opportunities. You can pay a professional to monitor your affairs, many people prefer to spend their time on other things, but my advice is Never Delegate Strategy or Oversight.

Home | Newsletter | Taxpayer Assistance and FAQs