Planning and Goal Setting

Goals as applied to financial planning must be Specific as to How Much money you want to accumulate, by When, and for What Purpose.

Thus, this will vary in terms of timing and purpose.

It will also have to be anchored on your current Cash Flow situation.

If you have a hefty cash flow, then you can proceed with the goal setting.

However, if your cash flow is negative and wont be able to support your goals, this must be the first thing you need to address or solve. You first need to define your goal for having positive cash flow.

Your timing for your goals must include the Short Term ( about 1- 2 years) , Medium Term (about 3-5 years), and Long Term which is about 6-10 years).

Set your goal on how much you need to save for Emergency Funds. These are funds used for emergencies such as minor repair of your car, your house, or for medical emergencies.

We set aside at least 50K for this purpose.

You may use the 3-6 months of your monthly expense as guide. So, if your currently zero on this, you need o have a plan when can you fill this up. This must be part of your short term goal.

If you are heavily indebted as most people are, you need to set a goal when you will be debt free. List all your debts, and include the detail of much interest you pay for each.

Prioritize the debt with the highest interest.

For us, this was our biggest money issue. We have so much credit card debts, and so many loans to pay up. We lined up all these payables, and set target for each item prioritizing the ones which has the highest interest.

If you are employed, normally, the company provides short term health care and Life Insurance Protection. However, most if not all companies, do not provide long term health care and that the coverage of your health care and insurance protection is co-terminus with employment. This means that when you resign or they yank you out of the company, you lose the benefit. Thus, it is of extreme importance that, you set a goal for this very basic need: Health Care (Short and Long) and Insurance Protection.

We recommend you seek professional help in determining your needed Insurance Protection coverage.

Normally, we calculate Insurance Protection by what we call DIME Method. By DIME we mean

D- ebt Payments ( swum total of what you have as credits)
I- ncome Replacement (10 X Annual Income)
M- ortgages ( sum total of all mortgage loans)
E- ducation (Projected Cost of Education of your children)

If you are in your senior years, you need to also seriously consider your Estate Planning.

This by itself is a long and extensive topic to cover. This certainly will need professional help.

Once you have calculated your insurance protection needs, you subtract this by the amount of investments you already have. For example

You also need to set a goal of how much funds you want to accumulate for your retirement. The recommended amount is about 10X your Annual Income. So if you are earning 1M each year, your target is 10M Php. Consider when you will retire and calculate how many more years you have. Then project how much you will be able to accumulate on your target date or year in your goal set.

In summary, Goals must be be set for the following:

1. Health Care
2. Insurance Protection
3. Emergency Fund Build Up
4. Debt Elimination
5. Investing for the Future (Retirement)

The above order needs to be seriously considered. Most common mistake is to prioritize investments over the first four resulting to disastrous consequences .

Suppose you have 1M investments, but you have Credits amounting to about the same, and you do not have insurance protection. What do you suppose will happen to your family?

Do not commit the mistake of ignoring your health care and insurance protection simply because you are covered by your company. The earlier you get your own personal account on these two, the better for you.

In our company; IMG, we have a 3 in one solution to your health care, insurance protection and investment needs. If you are interested to know more about this, just send me an email.

After setting up your goals, you are now ready to set up your plans to achieve these goals.

See you later on the next blog about planning to achieve your goals...

God bless.