The past few months, we’ve been doing something new here at Newleaf Financial Guidance: We’ve been building out a comprehensive case study to showcase how Newleaf works with new clients. Our case study participants, Josh and Sarah Ackerman, aren’t real people. However, the problems they face, and the solutions we create together, are all-too-relatable.
In our previous posts, we’ve discussed:
- How to define values as a couple
- How those values impact your money
- The best way to evaluate your financial concerns when building a strategy
- How to set up a hub account to get a handle on your cash flow
- Budget building basics
This week, we’re tackling how Josh and Sarah are going to set a few concrete money goals to begin working toward – and why these specific goals help to address their underlying financial concerns and start to lay the foundation for a fulfilling financial future.
Note: If you’re just now joining us, you may want to start at the beginning of this case study series.
The Importance of Concrete Money Goals
Now that Josh and Sarah have built a budget, made a few financial changes that line up with their values, and have implemented a hub account to increase their monthly cash flow, we need to set some clearly defined financial goals. These goals won’t be the first and last goals we ever set together. On the contrary, the initial money goals you and your partner set are just that – initial.
They’re giving you a place to start your financial journey. These first goals are going to act as a pace car for Josh and Sarah over the next several months, or even years, as they move forward with their financial plan. Once we surpass these goals, we can set new ones that continue to move Josh and Sarah down the path to financial freedom and, ultimately, retirement.
Pay Off Credit Card Debt ASAP
Our first goal is going to be to pay off Josh and Sarah’s credit card debt as soon as possible. If you’ve poked around my blog at all, you know that I’m not a huge fan of debt. Consumer debt, like credit cards, often comes with high-interest rates and a guilty conscious. I firmly believe that paying down credit card debt as quickly as possible should be your number one priority when it comes to debt repayment. Once credit cards are paid off, we can focus on auto loans and any student debt that’s still outstanding. Keep in mind that Josh and Sarah will still be making payments toward their other debt, they’ll just be putting anything extra in the 30% of their budget that they’ve allocated to debt repayment toward credit cards first.
Build a $5,000 Cash Reserve
Josh and Sarah both know that Josh’s older car won’t last for forever, and with a baby on the way they have even more upcoming expenses to think about. A $5,000 cash reserve can help to offset any hefty costs associated with purchasing a new vehicle, fixing up Josh’s current car, or medical bills that are in their near future. This will also help to address Josh and Sarah’s underlying concern that they’re going through life without a safety net. Often the peace of mind associated with an emergency fund is enough to encourage positive financial decisions in the future and avoid going back into debt.
Create a Travel Fund
Josh and Sarah both value experiences over things. However, when we take a closer look at their spending, we find a lot of small expenses that are “things” focused. Creating a travel fund can help them work toward their goal of seeing more of the world, spend quality time together and with family, and to satisfy Josh’s value of adventure. When their travel fund is built up, they can start tapping it to book trips and enjoy life a little bit. I often find that when clients put money toward saving for a big-picture goal, like travel, they’re less likely to overspend in other areas of their budget. Additionally, they’re more fulfilled because they’re using their money for something that they value.
Start A House Fund
During our conversations, Josh and Sarah were very motivated to buy a house in the next few years. However, after taking a more careful look at their financial situation, we agreed that it might be wise to save for a few additional years to build a sizable down payment for a house that Josh and Sarah were truly in love with while also minimizing their current debt to make room for a mortgage. Starting a house fund will help them put money away over the next few years for their down payment, and they’ll continue to feel fulfilled that they’re actively working toward a big-picture goal of theirs.
Working with a Financial Planner to Set Goals
Setting goals on your own can be overwhelming. Look at Josh and Sarah’s situation – the initial goals we set weren’t revolutionary. They were just a starting point to get them moving in the right direction toward financial freedom. But they didn’t reach those same goals on their own, they needed to contact a financial planner for assistance.
There’s nothing wrong with asking for help. Too often we feel like we must have all the answers, and we’re embarrassed to admit that we don’t know what we don’t know about our finances. At Newleaf Financial Guidance, we dismiss that feeling of embarrassment immediately. In fact, coming to a professional for guidance just goes to show that you’re willing to invest in yourself to get ahead financially.
Are you ready to move forward with your financial journey? Contact us today, and don’t forget to come back in a few weeks for our next post on selecting student loan repayment plan for Josh and Sarah!
