Short Term Financial Goals

When you’re establishing your financial plan, the first thing you need to do is identify both your short-term and long-term goals. Identifying goals and a plan to support them can bring you assurance of a sound financial future. Without clearly identified goals and a supportive plan, there’s the tendency to mismanage your money with fruitless spending leading to the potential for financial trouble.

Think of your goals as the foundation for your financial plan. Each financial goal should have a time horizon and can be a stepping stone for a future goal. Short-term goals differ from long-term goals usually in the sense of timing. Short-term goals are generally smaller in scope and dollar amount with a definite target date for accomplishing them. Short-term goals could be the purchase of household furniture, minor home improvements, saving for a car down payment, etc. But these short-term goals differ from the day-to-day household expenditures.

A short-term goal is one that you’d want to achieve in one to two years. Most investment advisors say your first short-term goals should be getting your financial house in order by eliminating credit card debt and establishing a rainy day fund. Intermediate-term and long-term goals include buying a house, starting a business, and retiring according to your own schedule.

Here’s how you can get started determining short-term goals and building a supportive financial plan.

Identify your financial goals:

First, figure out what you want to achieve most in your life. This can range from buying a house to starting a business or retiring according to your own schedule. Without goals, any money you earn can easily be spent instead of being saved or earmarked for an important milestone or goal. As well as identifying financial goals, estimate the amount of money you’ll need to accumulate to reach each goal.

Prioritize each goal:

How important is each goal? Your first priority is to save and invest for your retirement. This means that before anything else, a portion or percentage of your paycheck is invested into a retirement plan at work, an IRA or Roth IRA, on a regular basis. Only after that occurs does additional money get earmarked for other financial goals like saving for a house or new car.

Knowing your Goals

Knowing your Goals

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Example of Long Term Financial Goals

One of your long-term financial goals is saving for your daughter’s college education, which is six years away. However, more recently your daughter decided she wants to attend a private high school, resulting in you tapping into your higher education savings. As long as you started saving when your daughter was young, you may have enough to cover both private high school and college or you could increase your savings now to pay for college. Experienced financial advisors can help you navigate unexpected events and tricky situations. Here are some other things to consider as you set your long-term goals.

Time value of money:

The time value of money is a key concept in finance and it is simply the increase in the amount of money as a result of interest earned over a period of time. Essentially, the earlier a person starts to invest, the greater the power of compounded interest over time.

Monitor your investments:

It’s important to check your investments regularly. We recommend personally reviewing your portfolio on a quarterly basis and meeting with your investment advisor at least twice a year. Manage your risks by making sure your chosen asset allocations are still in line with your overall goals. Make adjustments to your investments only when needed. One of the benefits of having an investment advisor is he or she can monitor your funds for you and recommend different investments when it’s necessary. Also, remember to revise your financial plan accordingly if your goals change or you identify new goals.

Withdrawing money from your retirement funds:

When you stop working and have reached your goal of retirement, you’ll need to figure out how much and when to withdraw money from your retirement accounts. There are some tax rules you need to follow as well. When you turn 59½ years old, you’re allowed to withdraw money from a tax-deferred retirement account like a IRA without a penalty.

The Ultimate Dream

The Ultimate Dream

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Every Investor’s Situation in Loaning

Beyond the emotions surrounding investment risk, you need to evaluate the facts of your financial situation and stage of life. The specifics can determine how well you come through market fluctuations. Ask yourself about these influences when considering the risk you might take in your retirement plan:

1. Time – How many years will it be until you need to sell or restructure investments, either for the start of retirement or for other major events in life?
2. Income stability – How stable is your job or business income? Are you confident your income will hold up even if your investments experience some volatility?
3. Emergency funds – How many months of living expenses do you have in a cash reserve and will it carry you through emergencies without tapping into long-term investments? It is recommended that you have at least six months of emergency savings but you may want more depending on your circumstance or risk tolerance.
4. Insurance – Do you have sufficient medical, disability and life insurance coverage to endure an emergency and support your dependents without selling off investments? According to the Employee Benefit Research Institute, a 65-year-old couple will need an estimated $271,000 to pay for all out of pocket medical costs throughout retirement, assuming the couple signs up for Medicare at age 65 and has no employer-provided retiree health insurance.

Successful investing and preparation for retirement come from establishing a sound long-term strategy and then following through with that plan. No one can foresee every emergency or life change, but you can minimize risks by providing for challenging times so you don’t need to abandon your long-term goals for every unexpected expense.

Good advice:

Seek out expert advice specializing in retirement planning. Solid financial advice should offer you objectivity and benefits of life situations when assessing your preferences for risk. Along with expert advice, be sure to give ample thought to risk, volatility and your own self-assessment. Paying attention to the risk side of retirement will enable you to design a long-term investment plan that feels right and pays off as you fulfill your goals.

Risk is always possible

Risk is always a possibility

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What are Financial Obligations?

In planning for retirement, you need to take a realistic look at debt and financial obligations, as well as expenses for this new phase of life. Assessing your expected costs of retirement, with objective insights from a financial advisor, will help you realize your retirement plans and embrace the lifestyle you choose. This evaluation will enable you to adjust your expenses as needed, and develop a budget to ease the transition. If you approach retirement still owing money, you are not alone. According to the Federal Reserve’s 2010 Survey of Consumer Finances, nearly 65 percent of families headed by a person between the ages of 65 and 74 years have debt – including 40 percent owing on mortgages, 32 percent carrying credit card balances and 20 percent paying on installment loans.

The problem is that continuing to pay off debt is more difficult on a fixed income. When expenses spike, as in a medical emergency, retirees can find themselves in a financial bind. Among people over the age of 65 years, approximately seven percent end up filing for bankruptcy through many citing credit card debt and health issues. To avoid a financial crisis, it’s best to prepare now by getting a realistic picture. A starting point is to list all of your financial obligations. Consider all kinds of debt and regular commitments including amounts, payment schedules and the duration of the debt.

Non-mortgage debt:

If your mortgage interest rate is three…four…or even five percent, it might be advisable to not pay off the loan by a certain date or with extra payments. Given the range of mortgage interest rates, you have the potential for higher returns with your investments. However, non-mortgage debt can add up to substantial obligations. As you approach retirement, you need to make a complete list of these other debt. Examples include:

1. Credit card debt as well as balances you carry over from one month to the next.
2. Auto and other installment loans, such as for appliances or home improvements.
3. Loans you have co-signed for children or others and could be called upon to pay.
4. Business or farm loans you have taken out personally or co-signed.

Avoid too many obligations

Avoid too many obligations

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Amendment through Loan Assistance

There has been a constant call from the Korean public and to some extent, Japanese with left or liberal political leaning, that Japan should compensate Korean individuals who suffered from Japanese colonial rule especially the comfort women. The Japanese government has refused to do so, arguing that it settled issues on a government-to-government basis under the 1965 agreement. Even the Japan comfort women have not received any form of compensation from their very own government. However, in January 2005, the South Korean government disclosed 1,200 pages of diplomatic documents that recorded the proceeding of the treaty. The documents, kept secret for 40 years, recorded that the Japanese government actually proposed to the Korean government to directly compensate individual victims but it was the South Korean government which insisted that it would handle individual compensation to its citizens and then received the whole amount of grants on behalf of the victims.

Japan - Korea Dispute

Japan – Korea Dispute

The Korean government demanded a total of 364 million dollars in compensation for the 1.03 million Koreans conscripted into the workforce and the military during the colonial period, at a rate of 200 dollars per survivor, 1,650 dollars per death and 2,000 dollars per injured person. South Korea agreed to demand no further compensation, either at the government or individual level, after receiving $800 million in grants and soft loans from Japan as compensation for its 1910–45 colonial rule in the treaty. However, the South Korean government used most of the grants for economic development, failing to provide adequate compensation to victims by paying only 300,000 won per death in compensating victims of forced labor between 1975 and 1977. Instead, the government spent most of the money establishing social infrastructures, founding POSCO, building Gyeongbu Expressway and the Soyang Dam with the technology transfer from Japanese companies. This investment was named Miracle on the Han River in South Korea. As the result of this revelation, there have been growing calls for the Korean government to compensate the victims. A survey conducted shortly after the disclosure showed that more than 70 percent of Korean people believe the South Korean government should bear responsibility to pay for those victims.

Japanese Comfort Women rally for their rights

Japanese Comfort Women rally for their rights

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Establishing Long Term Loan Goals

There are short-term goals and long-term goals and some financial goals that fall in between. The distinction between the categories is usually related to the amount of time it takes to accomplish the goal and the financial commitment to achieve them. Short-term goals are achievable in the more immediate future and intermediate goals take slightly longer and more of a financial commitment. Long-term goals usually take more than five years to accomplish and require a disciplined saving and investing strategy over a long time period. The most important long-term financial goal for everyone is to save for retirement. For most people, this is the first priority over saving for any other goal. The first step is to develop good savings and investing habits and establish a financial plan when you’re young. If you start contributing to an employer’s plan or an IRA or Roth IRA as soon as you begin working, and consistently put money in those retirement accounts, you’ll be on the right track to accumulate enough money for your retirement years.

There are a few ways to become a disciplined saver and investor. Below we share a few long term goal examples:

1. Set up automatic investments to your retirement plans and investment portfolio to help you avoid spending your hard-earned money when you get a paycheck. When you don’t see money in your bank account, you won’t spend it. Instead, you’ll be saving for your goals and your investment account will grow in value over time.
2. Try not to be emotional about your investments and don’t jump in and out of your holdings when the market is volatile.
3. Monitor your investments and risk regularly, and make adjustments to your portfolio when needed.

Even the most disciplined investor can expect some bumps in the road like the loss of a job or a family member who becomes ill and requires care. Likewise, events that might seem far away initially can somehow sneak up on you.

Primary Obligation

Primary Obligation

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Setting Up Financial Goals

Setting your financial goals puts you in charge of your money and your life. Your goals can be short or long term, small or large, but they all need to be achievable. The first step to getting sorted is to work out where you want to be financially and what your priorities are.

Goal Setting

Goal Setting

How to set your goals:

Be specific, realistic, and write down your goals. Keep each goal simple and give it a timeframe and a dollar amount.
1. Set some big goals – like buying a home in the next five years or saving for your retirement. This could be your biggest goal of all.
2. Set some smaller goals to help you get there – like saving for a deposit or paying off your credit cards.

Saving and paying off debt:

Financial goals are often about saving or paying off debt:

1. If you have high-interest debt, like credit card or hire purchase, your main goal should be to pay that debt off first and as soon as possible. This could involve re-structuring your debt into lower-interest loans.
2. Saving two to three months income for an emergency fund can help you and your family if anything unexpected happens. It’s a good idea to have this fund in a savings account separate from your normal everyday bank account.
3. If you have a mortgage and can afford to increase your repayments, your goal may be to save on interest by paying off your loan faster.
4. The earlier you start saving for your retirement the better. Even a small amount saved every week or month can add up to a lot over time.

Actions to achieve your goals:

Actions are the steps you take to reach your goals. Here are some examples:

1. If your goal is to save for a house deposit, your action may be to open a savings account by next pay day and save $50 a week into this new account.
2. If your goal is to save for your retirement (or to save for a deposit on your first home), your action might be to talk to your employer about joining KiwiSaver.
3. If you pay your mortgage monthly, your goal could be to change to fortnightly repayments of at least half the amount you were paying each month. This will pay off your mortgage faster and save on interest.

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Daily Expenses and Health Care

Daily expenses:

Ordinary living expenses will continue after retirement but most likely will decline. One back-of-the-envelope formula calls for reducing expenses by 20 percent post-retirement. However, depending on the individual, expenses may or may not be lower after retirement. You can evaluate your expected costs by listing all of your actual living expenses now such as housing costs, utilities, groceries, transportation, taxes and insurance, entertainment with the changes you are confident you can make under a retirement budget. It is worth noting that many retirees take on living expenses of others in the family including the children, grandchildren or aging parents and these costs can add to your own financial obligations. Also, take into account that the lifestyle changes many people associate with retirement devoting more time to hobbies like golf or fishing, entertaining friends and family, moving to a resort-like community, dining out and traveling the world, all come with price tags.

Health care:

While some expenses typically shrink in retirement, health care costs are likely to increase. Medical expenses will vary widely with individual health and insurance coverage, but information to think about include:

1. Will you be eligible for Medicare benefits at retirement? If not, at what age?
2. Will you have employer-sponsored retiree health insurance?
3. Have you arranged for supplemental insurance on top of Medicare?
4. Have you analyzed the pros and cons of long-term care insurance?

According to the Employee Benefit Research Institute, a couple retiring at age 65 will need $271,000 in savings just to pay out-of-pocket medical costs through their retirement years. This is assuming median drug costs, average life expectancies and no employer-provided retiree health insurance though individual circumstances may drive these costs higher or lower. As you gather information to assemble a retirement plan, our experienced advisors can offer the objectivity, knowledge of various scenarios and specialized data to help you assess the obligations and costs you will face during your Golden Years.

Nowadays, retirement pension is not a suitable source of cash due to that fact that the daily expenses of a normal person is too high due to the demands of the society. If this is the case, how would the old women who were former Vietnam comfort women support their lives including their family? Comfort women does not have retirement pensions like office workers do. Their former job was not to make a living but for them to face the terror of living. Today, these comfort women continue their quest to receive compensation for the service they were forced to do.

The Weight of Financial Obligation

The Weight of Financial Obligation

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Investment Risk Tolerance

When you envision your retirement years, chances are you may not see investment risk as central to the picture. But defining your approach to risk is, in fact, vitally important to developing a retirement plan that works.

There are two scenarios you want to avoid when approaching retirement:

1. Solely focusing on maximizing returns only to find that market losses have eroded your savings.
2. Discovering your nest egg has not grown because it was stored for safe keeping in accounts that paid near-zero interest.

A key step is to analyze your feelings about risk, or risk tolerance, in light of your financial position. Can your retirement plan withstand short-term fluctuations in the markets? Will you be able to sleep soundly when the market drops, as well as when it rises? On the other hand, are you accepting enough risk to earn the returns your portfolio will need to cover retirement costs?

Know yourself by discovering your risk tolerance:

Assessing your “risk tolerance” is highly personal and it is about knowing yourself. You should analyze your own feelings about risk, then have an in-depth discussion with your financial advisor to be confident that your retirement plan fits your risk preferences. The values of most investments fluctuate in the financial markets. This is referred to “volatility.” The investment industry often uses jargon or labels as shorthand for risk but labels may miss the point:

1. Defensive vs. aggressive.
2. Investment-grade vs. high-yield.
3. Formulas like “beta” or “Sharpe ratio”.
4. Labels like conservative, moderate or aggressive for investor.

What you need is peace of mind with the level of risk you are taking. Nobody is happy when investments drop in value, but you can test out some scenarios to see how volatility affects you:

1. Do you lose sleep or find yourself beset with worry about your savings?
2. Does it upset you if a monthly statement shows your balance has dropped a percentage or two?
3. How about if your account declines 10 or 20 percent? Will it cause you to sell everything, ride out the dip as a “market cycle,” or add more money in an effort to “buy low”?

There is always a risk in investing.

There is always a risk in investing.

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Determining Financial Goals to Accomplish

Assess your finances and eliminate credit card debt:

Take a good look at your financial situation, including credit card debt, student loans, car loans, mortgages, etc. Before you start investing and saving for your goals, you need to eliminate credit card debt that carries very high interest rates. This should be your first financial goal. Once all credit card payments are made, you can then take that same amount of money and invest it. All other debt such as student loans, car loans and a mortgage, tend to have lower interest rates and can be paid down while you invest in the markets. In addition, if you have bought stocks or funds in the past and those investments still make sense, determine if they fit into your financial plan. Close brokerage and bank accounts you don’t need or use. Figure out how many years you have until retirement and the amount of income you’ll need.

Set up a back-up fund:

Once you pay off your credit card debt, your next short-term goal is to build up a back-up or emergency fund. It’s generally a good idea to establish a back-up day fund before you invest for any other goal. Advisors recommend that people set aside three months worth of everyday expenses into such a fund. This helps build a cushion for unforeseen expenses like a car repair or replacement of a large household appliance. It pays to plan ahead. Also, try not to put large essential expenses on a credit card, because that will just put you back to square one.

Your next short-term goal is improving your savings by cutting back on unwarranted spending. Reduce spending on things that are more luxury-type items and wants as opposed to needs. Cut back on eating out and restaurants and maybe try renting movies instead of going to the theater. Think of other expenses that you can eliminate, such as bottled water, magazines at the newsstand and your land-line phone at home. Try to use debit cards instead of credit cards as well, unless you plan to pay off your credit cards at the end of each pay cycle.

How to make goals

How to make goals

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