4 Ways You’re Crippling Your Long-Term Financial Goals

ThinkstockPhotos-495235369From retirement to college education or a new home, long-term financial goals are achieved with proper planning and proactivity. Ultimately, reaching these goals is a number-one priority, but it’s also incredibly beneficial to do so without the burden of stress.

Despite the desire to successfully save without stress, many Americans make simple, fixable mistakes that inhibit their ability to accomplish their long-term financial goals.

Below are four missteps that may be crippling your financial goals.


1. You Haven’t Identified A Specific, Measureable Goal

“Savers” often take the flawed approach of saving as much as they can and hopefully having enough when they “get there.” Is this is an effective goal? Is it even a goal at all? To successfully accomplish something – let alone a significant long-term financial goal – you must have a quantifiable, measureable target.

Especially for retirement planning, there are many calculations that estimate how much money you need to accumulate based on your current income and how much you spend on living expenses. The main variables include the age at which you plan to retire and the percentage of your salary you spend on living expenses, as well as whether or not this figure is expected to fluctuate.


2. You Haven’t Determined How Much Your Future Net Worth Must Grow

Let’s say you know your current net worth and you’ve quantified how much you need to save for retirement. Next, you need to consider how much your retirement portfolio must grow in order to reach your financial goal.

In order to determine your future net worth, you should consider these factors:

  • What’s the expected rate of return of your investments based on the amount of risk you’re willing to bear?
  • How much of your income are you willing and able to save each year?
  • How much will your salary increase over the years, until retirement?

Though devising a spreadsheet is an initial step in this process, there are many available resources to help you make these determinations. First, you must be able to view your complete portfolio in one place. From there, you’re able to set short-term financial goals that roll up into the overall goal, calculate expected return based on risk factors and track your progress.


3. You Haven’t Broken Your Large Goal Into Smaller Milestones

What’s your plan? How are you getting from Point A to Point B? If you haven’t set smaller, short-term goals to help you progress, you’re more likely to fall off track. If you break down your long-term financial goals into annual goals and then monthly goals, it’s far easier to track your progress. Investment tracking software gives you even better insight into how you’re tracking toward these shorter-term goals.


4. You’re Not Tracking Your Progress

In case it wasn’t already evident, tracking your progress is absolutely critical to planning your financial goals. If you’re not identifying problems as they arise, how are you going to make changes? If you’re not making these changes in a timely manner, you’re risking your future.

A frequent reminder of where you stand in relation to your end goal helps you achieve your goal. If your goals are at the forefront of your mind, you’re far more likely to hold yourself accountable for your actions. In addition, visual tracking holds significant psychological power and is incredibly motivational. Just like runners who use phone apps to track their distance and speed to visualize their progress from run to run, you should adjust your financial behavior so you’re more aware and motivated in the short-term to reach your financial goals in the long term.

In order to produce better results, you first need to modify your behavior. When you take a proactive approach to saving, you’re much more likely to not only achieve your goals, but also do so without fear or stress. 

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