Setting financial goals is well-tread territory on this blog. And I still stand behind this years old post as an excellent primer for how to determine a) what your financial goals are and b) how to plan for meeting them within a calendar year.
There’s one problem with this post, though. It’s very much for beginners.
Because eventually, if you do it right, you’ll move beyond your first financial goals. You’ll grow older, partner off, maybe have a kid or two, and then everything multiplies: two retirement accounts, multiple savings accounts, and heaven forbid if you have to throw in your parent's finances in there down the road.
So, I’m here to cover how I and my husband manage multiple financial goals: how we prioritize them, put processes in place for them, and make sure there’s enough money for the things that are most important to us.
What Managing Multiple Financial Goals Might Look Like
When I was single, my financial goals in any given year looked a little something like this:
- Pay off $8,000 in credit card debt
- Fully fund Roth IRA with $6,000
- Contribute 5% to get the company match
- Save up for waterproofing the basement
- Etc.
And because there would only be about 5-6 of them in any given year, I’d take them down one by one, allocating everything I had in savings within a month to the highest priority goal and then moving on to the next. Kinda like the debt snowball method but for savings goals, if that makes sense.
Now that we’re married and managing our finances jointly, the goals may look like this:
- Max out both retirement accounts
- Put $6,000 into our son’s 529 account
- Refill our money cushion in bank account to where we’d like for it to be
- Save up for desired home repairs in 2021
How to Prioritize Your Financial Goals
Map out what is most important
Even with competing desires, you’ll still have to set priorities (even if you are married, even if you manage your finances separately), and come on, this isn't rocket science: I'm willing to BET there’s usually one or two financial goals that take precedence over all the others.
But in case you're still stumped, here's how I would recommend funding the goals if you're completely starting from scratch.
- If you don’t have one, I would prioritize putting together a fully-funded emergency stash. 2020 taught us to expect (and prepare) for the unexpected and we don’t know what lies ahead in the new year. Here's how to set up an emergency fund.
- Then, I would prioritize debt payoff first (everything but the mortgage). This is because typically credit card/personal/student loan debt is the most expensive, and getting rid of it will allow you to allocate more to other goals down the road. More money in the budget is the KEY to being able to hit all of those multiple savings goals. Here is a free debt tracker to get you started.
- Then set the goal for a home purchase. And I know certain financial experts are going to come at me for recommending this over maxing out retirement but hear me out. Real estate is a great, relatively stable asset. In most areas, you’ll spend less on a home than you will on rent, and even if you do spend more, it is toward an asset you can leverage to earn more in the future. Here's the complete 8-step guide on how to buy a home.
- Then retirement goals (if you can). This gets bumped up to the very tippity top if you have an employer who matches employee contributions. Because that is free money. And we do not leave free money on the table.
- Then all the other savings goals, including those for your children. While it is nice to prepare the future for your children, this shouldn’t come at the expense of your own retirement.
Have an annual meeting
My husband and I talk about money a fair bit, but we don’t really sit down with statements and spreadsheets and the like except for once each year. At this small “meeting” we talk about what we did well the year before and what we’d like to do moving forward. It’s a really informal conversation, maybe a little less formal than I’d like, but it’s helpful in getting us on the same page.
Allocate in the way that makes the most sense for your family
Often, when I get the question of “how to manage multiple financial goals,” it’s because people want some magic bullet that is going to help them find money in their budgets in order to achieve every milestone they want to hit.
And while I think it is a great goal to try and stretch yourself to meet all of the priorities in the year, it most often doesn’t work that way. Even for a high earning family with very little debt, we still struggle with meeting goals: my retirement in particular, because I have so much catching up to do.
Which is why it comes back to setting priorities.
For example, you may only have $800 to save at the end of each month after everything else.
If you’re trying to knock our student loans, maybe you give the lion’s share of this money to the loan payments and then only $50 each month to everything else: kid’s college, renovating your bathroom, whatever. (FYI – These are called sinking funds by some.)
The important thing here is to get into the habit of saving for multiple goals.
Little baby steps do add up to big sums in the end
And goals can absolutely roll over from year to year and shift priorities. (Like I showed in this post, for example.)
So, 2020 wasn’t my year to fully fund my retirement, but that doesn’t mean next year won’t be. Give yourself a little grace.
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