Juggling competing financial goals? Consider this 5-step process

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Education costs, retirement savings and more — pursuing all your goals can sometimes seem overwhelming. These insights can help enable you to pursue them all.
Even in your peak earning years, it may not always seem like there's enough money coming in to cover your current expenses and save for future needs. It's even more of a challenge when you're just starting out.
Depending on your age, you may be saving for your first home down payment, or looking to pay down existing debts. Then perhaps there's your children's future education costs to plan for, or a parent who requires caregiving. And, of course, your retirement accounts need regular care and feeding. That's all in addition to ongoing monthly expenses, as well as potential one-time costs — purchasing a car or for your new college graduate or a major home renovation, for instance. On top of everything else, you want to be sure that your emergency fund is well stocked so you'll be prepared in the event of a layoff or unexpected health crisis.
Sorting your goals as essential, important or aspirational — and identifying them as short or long-term — can help you and your advisor create a plan for intentionally and thoughtfully allocating your resources .
— Valerie Galinskaya, Managing Director and Head, Merrill Center for Family Wealth™
How do you juggle all of these competing claims for your financial attention? "It's essential to take a step back and consider all of your goals and values," says Valerie Galinskaya, managing director and head of the Merrill Center for Family Wealth™. She suggests the following five-step process. "Using this process, you can identify and prioritize your goals and then create a realistic plan for pursuing them." Talking with an advisor can help you clarify your financial needs, then provide guidance as you define and set your goals.

1. Write your goals down

Start by sitting down with your family to create a list of words and phrases describing your values, or what's most important to you. "Can craft a few short values statements — one or two sentences at most — that you can use to guide your family's financial decisions," says Galinskaya. For example, if you've identified giving back to your community as an important value, that commitment could help to inform other spending, saving and investing decisions.
Next, make a list of your goals. Your values will help to shape and, in some cases, temper them. Galinskaya recalls one couple who identified raising their children to be independent and resourceful as a core value. So, when planning for college expenses, they sat down with their children and talked about this family value — the why behind their thinking — and then discussed how much the children would be expected to contribute to their tuition every year.

2. Set some priorities

Decide which of these buckets they belong in: essential, important or aspirational. Essential goals absolutely can't be put off — such as saving for retirement and preparing to cover rising health-care costs as you age. Important goals are less critical, but represent core values such as paying down debt or providing for education costs. Anything that's merely nice to have — say, a vacation home or condo — is aspirational and should be lowest among your priorities. "Sorting your goals as essential, important or aspirational — and identifying them as short- or long-term — can help you create a plan for intentionally and thoughtfully allocating your resources," says Galinskaya.

3. Determine how much you'll need to save

Now you're ready to put investment strategies in place to help you pursue your goals. Start with the essentials, says Galinskaya. Determine how much you'll be able to devote in total toward your goals — and, just as critically, how much you'll need in order to reach each individual goal. Once you have the essentials covered, move on to your important goals and, finally, to your aspirational goals.

4. Take into account your time frame for meeting your goals

It makes sense to tailor your investing strategy to the amount of time you have to meet a particular goal. For one coming up in the near term — say, the down payment on a house — you'll probably want to keep the money in a safe, liquid account such as a CD or money market account, says Galinskaya. For goals more than five years away — perhaps your son, daughter or other family member will be ready to start college in that time frame — you may want to consider adding higher risk/higher reward assets to your portfolio, or opening a 529 education savings account. If your goal is 10 years out or longer, such as retirement, you can afford to invest more aggressively for growth, because your investments should have time to rebound from any market dips. Talking with an advisor can help you stay on track and get answers to your questions and concerns.

5. Review your plan periodically

Life changes such as a marriage, divorce or a new family member entering the world are among the events that may change your economic outlook and necessitate a second look at your plans. Discussing your questions, concerns and ideas with an advisor can help you make any needed adjustments. "You may need to add or subtract goals or change their timelines," says Galinskaya. The objective is to understand the potential impact of the change across all of your goals, then to make considered decisions so that you're not shortchanging any of the things that matter most to you.
"Along the way, you may likely have to make tradeoffs," says Galinskaya. "But by using this five-step process, you'll be armed with the knowledge you need to help you prioritize your goals and align your assets toward pursuing them."
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