Goals-Based Financial Planning: What is It?

A lot of ink has been spilled over the best way to plan for your future financially. Some people advocate a radical investment strategy with lots of inherent risk, while others choose to be a bit more conservative. No matter your risk tolerance, you can benefit from a strategy known as goals-based financial planning to help you get where you want to go well into the future.

If you have an idea of how you would like to enjoy the years to come, goals-based financial planning could be the solution you need to achieve your dreams of financial freedom.

What is Goals-Based Financial Planning? 

Setting future, long-term goals for your money is the crux of goals-based financial planning. Many people intuitively know they need to plan for financial security in the future, so the idea of setting goals might sound obvious. The problem is that too many people set only vague goals such as “retirement.” 

Instead, take some time to think about the specifics. What do you really want from life? What would make you happy? Rather than the more generic and nebulous idea of retirement, try this one on for size: retire in a beach house in Hawaii.

A specific goal makes the goal more real, which helps you focus on the future. It also gives you a better sense of direction for where you need to go, how much you need to save, and the adjustments you’ll have to make to start toward that goal.

Achieving a dream like that doesn’t happen overnight, but by setting a specific goal, it’s easier to look ahead instead of focusing solely on the past and present.

3 Benefits of Goals-Based Financial Planning

Setting specific goals and then crafting a financial plan to achieve them makes the goal something real and palpable instead of a vague, far-off dream. Here are a few ways goals-based financial planning can help.

Financial Security

Understanding your finances and getting organized is a great way to give yourself peace of mind. You will ultimately feel better when you are prepared for what the future might hold instead of worrying about how you plan to pay the bills. 

Less Worry Over Market Volatility

It’s normal to feel anxious when the market starts to plummet, especially when you see your portfolio lose tens of thousands of dollars seemingly overnight. 

However, when you focus on the long-term goal, it’s easier to set aside concerns over short-term fluctuations in the market – whether it’s stocks, real estate, or both. After all, you won’t be planning on spending that money for ten, twenty, or maybe even thirty years. You still have the shares or own the property, and there is plenty of time for the market to recover.

Achieve Your Dreams

Last but not least, goals-based financial planning helps you achieve your real dreams. Simply put, you will not achieve big goals overnight. If your plan is to retire in Hawaii, it’s a goal you’ll need to prepare for over many years. With a specific goal in mind and the help of a financial planner, you can take the first steps toward your dream today. 

How to Get Started

The good news is that starting on this journey does not have to be overly complex. A financial planner can assist you with specific strategies and adjustments, but there are a few things you can do on your own to start planning for your future.

First, you need to take time to mentally prepare yourself for what comes next. You need to have a deep understanding of what exactly you want from your life in the future. Open yourself up to the process and understand that you may have to make changes to your current habits in order to make your new goal a reality. 

Next, you will need to understand where you are right now financially. Understanding the current situation of your finances tells you where you need to go and how to get there. It starts with a simple exercise you may be familiar with: budget reconciliation. You should know where each dollar comes in and goes out in a given month. 

When you finish reconciling your budget, think through your risk tolerance. If you’re saving for a goal thirty years down the road, you can likely invest more aggressively and tolerate a greater degree of risk. If your long-term goal is right around the corner, a more moderate strategy might be the better fit. This depends on your goals, timeline, and personal preferences. 

Last but not least, you should consider finding outside advice. Navigating these waters all on your own can feel overwhelming. If you have someone watching your back who understands your goals and has the market experience you need, you can benefit from their experience. Not to mention, a fresh perspective can sometimes help reorganize or spot new solutions. 

Don’t Take This Journey Alone

If you’ve been searching for a helping hand to guide you through setting goals and achieving them, reach out to Black Mammoth. With us on your side, you can rest easy knowing that you aren’t alone on this journey to financial freedom.

At Black Mammoth, we take a holistic approach to planning that helps us understand your full financial picture and spot creative strategies to stabilize and grow your wealth. We’ll help you understand your long-term goals – and collaborate with you to find the best path forward. Reach out to us today to see how we can guide you through the process of goals-based financial planning!