In this step, you need to think through your personal and financial goals and when you hope to achieve them. Samples goals include:
- Pay off my credit card debt of $3,000 within the next six months.
- Pay off mortgage faster by paying down an extra $5,000 each year.
- Save $20,000 for an emergency fund within the next 2 years.
- Save up $25,000 down payment for a house over the next 3 years.
- Save $40,000 for my child's education by the time she reaches age 18.
- Save $5,000 for a vacation in Florida next year.
You will need:
- A checklist to help you sort out your goals.
- A worksheet to record your goals.
What you need to think about:
As you set your goals, consider what’s most important to you. You may find you want to pursue more than one goal at a time. Also, your priorities will likely change over the years. To learn more, read these case studies:
- Paying off debt and starting to save: Erika’s story
- Building wealth: Paula and Tahir’s story
- Preserving wealth: Prem's story
- Passing on wealth: Rodney and Rose's story
When you state your goals, be specific. For example, it's not enough to say, "I want to have enough to retire comfortably." A better goal would be something like, "I want to save $500,000 by the time I'm 65."
Your goals also need to be realistic. So think about your financial situation. How much can you really afford to save each month? If you work with a financial planner, they can offer a 'reality check' for you.
Questions to ask:
- How soon do I want to reach each goal?
- How much money will it take to reach each goal?
- How much can I afford to save toward each goal?
- What will I gain or lose by putting one goal first?
- What choices will help me enjoy a better quality of life today? In the future?
Remember: You likely can't pursue all your goals at the same time. A financial planner can help you sort out what to do as you build your financial plan. Just be sure that you choose a planner with proper training and credentials.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.