Just as New Years resolution gym-goers start to give up their good habits in the first or second month of the year, people abandon all kinds of resolutions or goals within the first months of the New Year. By February, about 80% of all resolutions have been ditched.
Good habits are necessary for health and overall wellness, and it’s no different with financial health. Just like with health-related resolutions, where it takes time to plan regular gym visits and healthy meals, it takes consistency and a plan in order to pursue the long-term financial results you’re looking for.
A couple months into the year, it’s easy to lose sight of those ambitious long-term financial commitments you might have thought about or even decided to make a reality this year and beyond. This is especially true if you haven’t taken the time to put the steps in place to ensure you stay on track.
Today, we’re going to dive into what constitutes a long-term financial commitment, why they’re important, and ways that you can work to stay on track if you decide to take one (or more) on.
What qualifies as “long-term”?
It’s important to first designate financial commitments as short- or long-term. While shorter-term commitments might be achieved in 0-2 years or even 2-10 years, long-term ones can generally be classified as those with a timeline of 10+ years.
Depending on your commitment level, ability to put money away, and unique desires for financial performance, your financial commitments might take varying amounts of time, compared with others. You may even find that one part of your financial plan will move more quickly than another, due to unique factors impacting each portion.
When you work with a financial advisor to establish and track your financial commitments, you can work to figure out feasible timelines for your financial commitments. Generally, retirement plans, 529 education plans, and other big ticket savings goals qualify fall into the long-term financial commitment category, but again, these can vary between individuals.
Why think in the long term?
Going through the process to develop and create long-term financial commitments leads to a better understanding of your unique financial priorities and helps you to solidify a timeline for reaching future goals. Typically, long-term financial goals also lead to measurable short-term goals. This snowball effect is a good thing, since it can keep you focused on the big picture, even while you celebrate the little victories along the way.
Additionally, a combination of short- and long-term financial commitments and goal setting might even lead to a greater mutual understanding between you and your spouse on financial priorities and your overall desired financial future, whatever that may look like.
Lastly, we can’t forget the primary reason for financial benchmarking: to pursue financially a great desire, such as funding a grandchild’s education or having a comfortable retirement, that otherwise you would not be able to achieve.
What makes a good long-term financial commitment?
Ideally, you should strive for your financial commitments to be specific, measurable, and attainable. This is true whether you are saving for retirement or for an investment property: specificity, measurability, and attainability are each important characteristics.
That being said, goals can change. What you want in retirement, what you want to do with a property you want to buy, what your granchildrens’ aspirations are for college and beyond… these might change over time.
What doesn’t change is a commitment to building the capital to make those goals, however they change, a reality. If a goal is centered around motivations that are relatively stable, like having a solid retirement plan and/or being able to spend time and money on your family, it will be important to you.
How can you stay accountable to long-term financial commitments?
Hand in hand with these considerations is a practical step: Record your thoughts on paper, or some place you can access them to review them. Consider taking a novel approach to naming accounts by calling them by the specific goal they are setting out to achieve. As your priorities shift or change, knowing the reasons you set out on this long-term goal in the first place will, at the very least, help you stay dedicated, motivated, and informed when making adjustments.
A second practical step is breaking down your larger commitments and goals into bite-sized pieces. Setting yearly, quarterly, or even monthly and weekly, if that’s the type of progress that makes you feel in control, makes taking on long-term goals manageable. Part of what makes a goal specific, measurable, and attainable is the ability to break it down to these increments, should you need or want to.
If you are working on specific savings goals, setting up automated payments can assist in meeting the smaller goals, taking the pressure off you to move money into certain accounts by certain dates. Automated payments or earmarking and immediately disbursing income to savings accounts can help you to prioritize the little steps that are working towards achieving the larger, long-term commitment.
You may also find it helpful to track your progress through apps or spreadsheets, or some other form of reporting. Your financial advisor can be an invaluable resource in helping you to keep track of investments, savings goals, and other factors that impact your progress as you work toward various financial commitments.
As your priorities change, you might also adjust your long-term plans, which is reasonable and even necessary at times. Again, your advisor can also help with these adjustments and make recommendations when plans seem to veer too far off-course.
Periodic meetings with your financial advisor should be an essential part of your planning as you work toward your long-term financial commitments. Not only can your advisor help you to monitor progress on your financial commitments, but they can help you to put the pieces together to establish goals and benchmarks that will help you to bring your ideal financial future into focus. They also provide a professional perspective that can objectively view your existing commitments to determine whether they align with your desires or whether they should be tweaked to make the most impact.
Set up an appointment today
Our advisors at Puckett & Sturgill Financial Group are the CFP® professionals who can help you take the steps necessary to develop and keep track of your long-term financial commitments. Set up an appointment today!