Unit Three- Financial Choices

Through this lesson, you will learn:

• how financial planning and goal setting are related
• why financial planning and goal setting can give you more options in the future
• about the relationship between needs and wants

Now is the time to take charge of your future. Financial planning and goal setting will allow you to determine what is important for your future, and will help you reach your dreams.

Getting the things that you want out of life starts with a little planning. Setting financial goals is very much like setting any other goal. If you set your financial goals for the future the way you set other goals for yourself, you will find that you are able to obtain the material things you want in life. Now, this is not to diminish those who do not wish to have a lot of material goods. It is just a way of getting the things we want and need in life. For example, have you thought about.....

1) Who is going to pay for your post-secondary education?

2) Do you want to have a car to drive?

3) When do you want to move out of your parents' home and live on your own?

4) Do you want a partner and children in life? Kids cost money!!

5) Do you want to have a vacation home in a warm country?

6) How much income will I need to afford the things that I want?

 All of these things are worth considering and although some are long way off, others will sneak up on you before you know it!

1. Dream the goal

Make a list of everything that each of you wants ... all the goals you think you want to achieve. They may involve money, or material things, or better relationships, or a special vacation, an improvement in your grades, or a change in your personal attitudes or habits.

Get some paper and a pen and go somewhere where you will be uninterrupted. Write down everything that comes to mind. Don't judge or dismiss any of your ideas. Remember that every member of the family should do this. You will all compare and agree to compromise on which goals to work toward first.

After you have this long list of goals written down, put the list away for a few days. Some of the things you wrote may begin creating a burning energy in your mind.

Review your list in about a week and see which of the goals you're still interested in. Anything that you don't feel strongly about should be removed from the list. Goal setting will not work if you're not really committed to achieving the goal. Have your family members do the same.

After you identify the goal or goals that you want to work on start writing everything down. A notebook just for your goals might be very helpful. Write down your goal on the first page of your notebook and you can all start formulating them in order of the least to most important.

2. Identify the obstacles that may prevent you from achieving the goal

After you've set your goal, make a list of things that may threaten the successful achievement of the goal and what you can do to remove those threats.

For example, are you and your spouse or child fighting over some of these goals? Write down ALL the obstacles that you feel may prevent you from reaching your goal.

This is a particularly magical part of goal setting because it takes all of the obstacles that seemed so huge before and reduces them to words on a piece of paper. Once the obstacles are clearly defined, they are often easily solved. 

3. Identify the things you need to help you achieve the goal

After you've identified the obstacles, make a list of the things you will need in order to achieve your goal.

This list should also include the people whose cooperation will assist you working towards your goal. Some of the items on this list may include some things that will represent solutions to the problems you wrote down earlier.

4. Set a date for the achievement of your goal

Setting a date for the attainment of your goal is the ignition for the goal-seeking missile in your mind. Make sure that your date is realistic... not so soon that it's impossible, but not so delayed that you'll lose interest before you reach it.

Write the date of your goal down next to your goal. Once you've set this date, you should never change it unless it is absolutely necessary.

5. Write down the goal and review it often

Once you have your goal and the date in writing, make more reminders of your goal. Put these reminders all around your house, your car, your bathroom, your bedroom, your office.

They will remind you of your goal and the date that the goal will be achieved by, and each time you see this information you will be programming your mind to take action toward your goal. This is a crucial step.

WRITE IT DOWN. REVIEW IT OFTEN.

6. Make a step-by-step plan

First, let's review: You know what you want and you know you want it badly.

You have identified the obstacles you need to overcome before you can achieve your goal and you know whose help and cooperation you will need. You know the date for the attainment of the goal.

Now, make a step-by-step action plan. Write down every little thing, no matter how small, that you must do in order to reach your goal.

Break down the project into small chunks... If you have a complicated list, jot down all the ideas that come to mind and then put them in date sequence later.

If necessary, number them and then type them into a word processor or re-write them in date sequence. Each item should also have a deadline for accomplishment so you can keep on target.

This is an important part of your goal achievement so don't cut corners on your plan, especially if it is a complicated goal or there are a lot of obstacles to overcome.

7. Follow your plan!

This is the fun part, because after you've set and hit your first goal, you'll know that all you have to do to achieve your goal is to follow your plan!

Review your plan every single day. Work on something on your list every single day.

Stay on schedule. Don't fall behind. Review your goal and the deadline. Mark items off the list as you accomplish them.

You can't control every aspect of your future, of course, but you will be surprised how many things you really can control with these effective goal-setting techniques.

A want, on the other hand, is something that you desire something you would like to have. But by no means will you suffer in any way (except perhaps mental anguish!) if you don't get the thing you want. "Wants" quite often fall into the category of luxuries nice to have, but the world will not end without them.

The hard part comes when you live in a rich society, like ours. Our standard of living is much higher than most places in the world – even our poor can usually meet their basic needs. For example, most Canadians can afford to own a television – and many own more than one. Yet most Canadians would agree that a television is a luxury – without it, you will still be able to eat, drink, and sleep in a warm place. Yet, in many countries around the world, many people do not have access to electricity, something which Canadians would consider to be an absolute necessity.
This example illustrates that what is considered a "need" in one country might be a "want" in another. Therefore, the real difference between a need and a want depends on your situation.

One person might need a truck, because they use it to haul fertilizer for their farm. Another person might want a truck because they like its power and its looks, and they want to impress other people – they may rarely, if ever, need it to haul dirty or large objects. The difference between a need and a want is often relative – it depends on the area in which you live, the company you keep, the lifestyle you choose, and the expectations of your society.

Needs and wants come in different forms. For example, you might need a television set, but does it "need" to be a 43 inch high definition plasma television or will a regular 13 inch television do the job? If you have enough money, then you could probably buy your want – the 43 inch HDTV. If not, you might have to settle for your need – a regular, older version television set.

So why is any of this a problem? The problem happens when people think they "need" many things, and then go in to debt to pay for them. This means that they cannot actually afford to buy the items outright, so they borrow money in order to buy them. They forget that when you borrow money, you have to pay the lender "interest" – a fee you pay for borrowing money. The longer you borrow money, the more interest you pay. Over time, you can end up paying huge penalties in interest for an item that you did not really need in the first place. People who get into the cycle of borrowing money for their needs often find themselves in an ever worsening cycle:
1. They crave an item, but do not have the money available to buy it right away
2. So they borrow money and buy the item
3. They have to pay the money back, plus pay high interest fees
4. Because they are paying off their debt, they have little money available for other needs or wants
5. But they need to buy something else
6. So they borrow more money
7. Then they have to pay that money back, plus more interest fees
8. Now they have even less money than before, but they still need to buy things
9. So they borrow even more money
and so on, and so on. When people have difficulty distinguishing their needs versus their wants, they can get
caught in a vicious cycle of debt.

It is important that you strike a balance between those things that you must have and the things that you would like to have. And it's important that you be able to prioritize your spending. The goal is to focus on those things that will really improve your quality of life rather than just look flashy. This means, what will make your life substantially better in the long term?

Here's an example of prioritizing between two "wants." Wouldn't it be nice to have a car – something that will get
you around, help you meet people, and give you your freedom?

Wouldn't it also be nice to be able to move out –
live on your own, make your own decisions, and have some independence?

Unfortunately, you might not have enough money to buy a car AND move out – you would have to make a choice. Would your quality of life be improved more by having your own wheels – or by living on your own? It depends on your situation, your priorities, and your personality – the choice is yours.

But, if you decide you must have both the car and the apartment, you will probably find yourself trapped in a cycle of debt – working hard to pay off interest charges on both items, and having no money available for other things that you need or want in life.

 Making wise financial decisions involves making tough choices between what you need and what you want. If you plan well, you can make choices that will improve your quality of life now and in the future.