In life, we’re constantly making decisions to tradeoff one thing for another. Perhaps your plan for more vacations throughout the year but make them less expensive, or your tradeoff and do one big vacation that’s more expensive. Or do you get the really great seats for a sports game, or get the worse seats but treat yourself to a nice dinner beforehand?
Life is full of tradeoff and compromise and your finances are no different. While there are micro tradeoffs that we encounter financially – we’ve all heard the stories about forgoing that cup of Starbucks
SBUX
Understanding Your Goals
An essential part of financial planning is understanding your goals, not just for your finances but for your life, so that you can tailor your financial plan to those goals. For example, if paying for your children’s college education is important to you, you’ll need to incorporate that into your financial planning. Where this comes down to a tradeoff, is that you may need to adjust your other goals by prioritizing – perhaps deferring your own retirement, or adding in additional income.
You can’t make the big tradeoffs and compromises in financial planning, and in life, without first defining and prioritizing your goals. You’ll need a good understanding of what is most important to you, and to your family. It will look different for everyone too, so what your neighbor is doing may not be the best fit for you and your life.
If determining and prioritizing your goals is a challenging task, working with a financial planner may help. They can also help you to create a financial plan based around those goals, and to model out various scenarios with different tradeoffs or compromises to see how they may play out in the future.
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