Whenever I ask people about their financial goals, the responses I get are usually pretty consistent. In fact, the responses have been so similar that I did a little digging and found survey research confirms my anecdotal evidence.
Despite the fact that all of us are unique in our own way, we share a common set of basic life goals, especially when it comes to goals that cost money. Of course, not everyone has the exact same goals, but the major life goals are practically universal.
So here are the top five most popular life goals, with a bit of advice on how to reach them.
Goal No.1: Retirement
No one wants to work full time forever, but we all have our own version of how retirement will play out. For some, its the traditional (and most expensive) version of no work and all play, and for others its a blend of work and play.
The reality is that most of us will have to choose the second option because the cost to fund a non-working retirement will be beyond our financial capacity. The simplest advice is the best: Start investing for your retirement now, because regardless of what your vision, you will definitely need cash to support it. Contribute to your company retirement plan if you have one, or put money in an IRA. Have funds taken directly out of your weekly or monthly paycheck so its on autopilot and not easy to change or forget. This consistent approach is the only way to build a nest egg over time. Start now. Today.
Goal No.2: Buying a Home
Despite the housing market woes of the past few years, buying a home is still a key piece of the American Dream.
If buying a home is one of your goals, do the basics to ensure you make a smart move. Wait and save up enough to put down at least 10% of the purchase price (20% down is better, but this isnt always realistic). And be sure your mortgage payment doesnt eat up more than roughly 30% of your monthly take-home pay. If you adhere to these two rules, you should be able to buy a home without becoming house poor or taking on undue price/equity risk.
Goal No.3: Having a Baby/Raising a Child
Truthfully, there is no way you can save up enough to pay for raising a child. Raising children is a major financial cost, so if you are thinking of having kids, you need to at least think about the financial impact they will have. But you can prepare. Heres how:
You will probably be able to absorb most of the basic monthly expenses by shuffling your monthly spending (less entertainment, more diapers and groceries). The key thing to think about is making sure you protect you and your family from risks. This means having enough life and disability insurance to protect you and your spouses income, and having major-medical health insurance coverage. Beyond that, you can begin saving for future expenses, like college education early, if you have the resources.
Goal No. 4: Paying for College Education
Another common life goal is paying for a college education, either for yourself or your child. However, the average cost of college has skyrocketed in the past 30 years, so building up enough savings to pay for college has become more difficult. Like retirement, the key to success is to get started now. Set up a college account (consider a state-based 529 plan) and have a certain amount transferred over each month. Put it on autopilot so its not easy to change or forget. (Perhaps youre seeing a pattern&)
Goal No. 5: Taking a Dream Vacation
The last life goal is probably the most frivolous, but it might also be the most fun to think about. If a dream vacation is on your list, the best thing to do is figure out exactly what you want to do so you can estimate the cost. Then, you can work backwards to see how much you need to save--and how long it will take--before you can do your dream trip.
Once you know what you need, set up a dream vacation account and start saving up! Like the other savings-based goals, make sure you have the monthly contribution automatically drafted from your accountautopilot is the way to go.
One last thing: regardless of your goals, be sure you create--and regularly update--a comprehensive plan for your finances. Planning will dramatically increase your chances of achieving all of your goals, so dont waitget started planning and saving today!
Bryan Link is the CEO and co-founder of SimpliFi, Inc., an online consumer financial planning service. SimpliFi has won several awards and was named Fast Companys Top 10 Most Innovative Companies in 2010. Bryans expertise in personal finance has led to him being featured in a variety of print and broadcast media, including ABC News, FOX Business and The Wall Street Journal.