You have a budget. You have either paid off your consumer debt or working on it. Now is the time to set financial goals and objectives.
The first step is simply to list them along with a time frame. An easy example is retirement. But other objectives may include a lifetime trip with the family, buying a new car, paying off. the mortgage early or planning for a child’s education. Note, list all of them. Determining priority and reasonability is a later step.
The second step is to assign each objective a dollar amount in present dollars and a time frame. For example, if you wish to buy a new car in three years and expect after the trade-in, you expect the cost to be $10,000. Your objective is a new car, your estimated cost is $10,000 and your time-frame is three years. Determining the amount needed for your retirement is a more complicated process, but can be easily done, especially with the help of a qualified independent financial planner.
Part of this process is to determine the amount of annual [or monthly] savings it will require to reach this objective.
Step three is to prioritize the objectives. On example I saw more than one is when parents had to decide which is more important, saving for retirement or savings for educational expenses for their children. In other words, if you only had the cash flow to accomplish one of your objectives, which would it be. Continue this process until you have prioritized all the objectives.
The final step is to is to go to your budget and determine the current amount of cash flow going into savings and investments along with the amounts if any, that can be added on an annual [or monthly] basis. Now you have two options.
One, apply the available cash flow to the highest priority. Once this has been done, if there is remaining cash flow apply this amount to second highest priority. Again if there is remaining cash flow, apply to third priority.
Two, apply the cash flow to two or more objectives emphasizing the highest priority.
This sounds simple and in one sense it is. But it also can be difficult. Reaching objectives takes financial discipline including sticking to the budget including annual [monthly] investing.
Finally, reaching financial goals, both short-term and long-term, can be very rewarding on a personal level.