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Setting goals--and achieving them together--is a wonderful
way to bring your marriage to new heights. Why do you need
to set joint financial goals? Most couples find that though
the process of setting financial goals can be challenging,
it brings them closer and reduces tension over money.
Do your visions of a financial future match your spouse's?
Do you both plan to retire early to a cabin in the woods,
or does he or she dreams of a sailboat while you have your sights
set on a condo near the beach? Sharing goals and dreams is
a necessary first step towards figuring out exactly what it
is you want.
Below you will find a few worksheets and methods to help
facilitate your discussions with your spouse.
- Don't forget careful planning for retirement. A solid
financial foundation is the basis for your other dreams.
Check out our Retirement
Planning section for help.
While setting goals, you may find it helpful to set separate
goals across different time horizons, either as a means to
spur discussion or to clarify exactly what you're shooting
for and when.
- Discuss the short-term goals that you'd like to
achieve in the next 12 months, like reducing credit card
debt and saving for a summer vacation.
- Compare the medium-term goals that you'd like to
achieve in the next 5 years, like paying off student loans
and starting your investment account.
- Share the dreams and long-term goals that you'd
like to achieve in the next 5 to 20 years, like buying a
larger house, taking a year-long sabbatical, or retiring
early.
You may not have the time or inclination for worksheets,
but setting specific goals, writing them down, creating a
plan to achieve them, and having ways to measure progress
is the best way to ensure you reach them.
When discovering and clarifying goals with your spouse, the
most important thing to figure out is where your goals don't
match up, and then to clarify and resolve any significant
differences. Couples who don't divide their energies between
different agendas not only to be more harmonious but also
to reach or exceed their goals more quickly.
Achieving Your Goals
To achieve your financial goals, you need a sound plan. To
create this plan, you can follow these steps:
- Determine your actual cash flow. Knowing your cash flow
is the foundation for step two--making a budget. By learning
where you and your spouse spend your money, you can quickly
identify ways to reduce your spending in order to save more
for your long-term goals.
- Make a realistic budget. To learn more about how the
Expenses
& Cash Flow Tool can be used to make a realistic
budget, read through MsMoney.com's Where
You Stand.
Categorizing Expenses
Making a good budget depends on being able to accurately
track, plan for, and measure your expenses. By considering
different ways of categorizing your budget, you should be
able to create the most accurate picture of your current spending.
Spending Items
Expenses can be grouped by categories of expenditure, such
as home, food, transportation, etc. as they are in MsMoney.com's
Expenses
& Cash Flow Tool.
Time Based
Another way to group expenses is by how often you have them.
Thinking about your expenses over different lengths of time
will often help you remember expenses that many people don't
plan for, such as yearly birthday gifts:
- Monthly expenses include your mortgage or rent
payments, utility and phone bills.
- Quarterly expenses can include your estimated tax
payments and insurance payments.
- Annual expenses may be yearly birthday expenses
or vacations.
Expense Type
Another powerful way to categorize expenses is by the type
you incur, whether compulsory or discretionary.
Compulsory Expenses
- Obligations are large, regularly occurring fixed
commitments that are largely a function of your lifestyle.
Examples are house payments, rent, property taxes, insurance,
daycare or childcare, car payments, and professional dues.
- Necessities are the consumable items that maintain
your lifestyle. Examples are groceries, utilities, phone,
medical expenses, home maintenance, pest control, cable
TV, kids' school lunches.
- Pocket expenses are the small, incidental expenses
that occur throughout the month: gas, snacks, newspapers,
street parking, and fast food. For the most part they are
necessary but too small to budget individually.
Discretionary Expenses
- Family allowance is a budgeted amount for discretionary
expenses such as entertainment, recreation, outings, photo
finishing, and gifts. These expenses are incurred for the
family--not individual members.
- Personal allowance is like the family allowance
but for each individual member. Like the allowance received
as a kid, it is the amount that each family member can spend
as they please, in a given time period--but no more.
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Joint
Financial Goals
