2a  
We all want to be happy. But, as with most things  in life, we need
a plan in our pursuit of happiness.  We need a financial plan to get
us from where we  are, to where we want to be. That's really
what goals  are: A plan to get what you want.  The techniques
you'll learn in this unit will let you  Measure your progress, and
tell you when you've  achieved one goal and are ready to set
another.  We'll also look at several goals that we all share  or
should share, like having enough insurance and having an
emergency fund.  During this course we are going to keep coming
back  to the subject of using a financial plan to support your 
goals. To be thorough, use the five steps of goal setting. One,
choose a goal. Two, make sure it’s specific and measurable. In
other words, a goal such as saving  $25 a week is specific and
measurable unlike an  Unspecific goal of “saving more”. Three,
make sure the goal is challenging but achievable. If you can’t 
imagine achieving the goal, maybe it’s too  challenging. Four,
Write down any obstacles that  may get in the way, these are
things that may prevent you from reaching your goal.  And  finally,
step five, write down solutions to the  possible obstacles you
listed. Creating our financial plan:  let’s think about  this as our
own personal treasure map.  The  treasures we are seeking are
our goals and they will to vary person to person and it will be hard
work and take some dedication but the map will  help us see our
way. First there are some goals that will take us longer  than
others to fulfill. We refer to goals in three  categories, short term,
medium term and long  term. An example of a short term goal
would be  saving for a vacation or holiday gifts, in other words 
goals that take a shorter amount of time, a year  or less.  An
example of a long term goal would be  saving for retirement or a
young child’s college  education. Medium term goals would fit 
somewhere in the middle.   So can anyone tell me what goals we
all have in  common? Retirement savings. Yes, that is an
important goal that we all need to  put on our list.  Does anyone
disagree that we all  need to have money set aside for the years
we  will no longer be working? Well there is social security for
when we get older. True but according to the Social Security 
Administration, Social Security benefits will  replace
approximately 40% of a workers income  and since most financial
advisors suggest you will  need at least 70 % of your income for a
comfortable  retirement there will be a gap that needs to be filled 
with personal investments or a company pension.  Can you think
of any other type of savings that all  of us should have? An
emergency fund. Perhaps we can think of that  as a medium term
goal.  Because we need money  if an emergency happens or in
times of  unemployment it is going to take some time to  fulfill this
goal.  You should have a minimum of  three months living
expenses but six to twelve  months would be better.  So let’s start
at a  3 month goal. Once you have achieved that you  can set the 6
month goal and then keep  increasing it as time and opportunity
allow.   In my own life, my emergency fund has been my  saving
grace.  It’s the one goal that time and time  again has proven its
worth and kept me out of the  fire.  If there is one piece of
wisdom you get from  this class and only one, this is one I hope
you will  take.  In life we do not know what unexpected  events
are about to come our way but we do  know to expect that they
will come and that many of them involve needing extra money.
Having an  emergency fund is essential! But how do we do that,
just three months of my  living expenses is $9,000.  Twelve
months is $36,000,  how in the world do I accomplish that? I really
find it  hard to get to pay day with a positive balance in my 
checking account. That’s fair.  Your right the 12 month goal
sounds big, really big, so let’s just forget the whole thing. Pack it
up right here and forget about it.  Better? No.   Good I was just
seeing if you were still with me.  An  emergency fund is an
achievable goal. Start small  and be consistent, that’s the key,
consistency.  If  you save $30 a week for 52 weeks you’ve just 
saved $1,560. Do you think you can find $30 a  week to save? If
you can save $50 a week you  have just saved $2,600 toward your
goal.  As I  said this is a medium term goal so it will take a  few
years but you can do it!   One of two methods can help.  One,
automate  your savings.  Once you look at your budget and 
decide on what is possible then set it up so that  your monthly
expenses go automatically into your  checking account and the
rest is set up to go right  into savings, see your payroll
administrator they  can help you set it up.  Once it’s in savings,
forget  about it…you can’t spend what’s not there so forget  about
it and let it grow so it is there when you need  it most.  If all your
money is going out for expenses and you have no money to save
it’s about time  you made some hard decisions because you are
playing too close to the edge and sooner or later  you will fall.
We’ll talk about needs vs wants in a  minute. So let’s start by
getting out a piece of paper and  writing down our goals.  We all
need three sections label them Short Term, Medium Term and
Long  Term Goals.  Here’s my list: Short Term Goals (within the
next year) Term Life Insurance is $90 every 6 months.  I will 
include $15 a month in my budget to cover the cost. Bi-yearly
vacation $1,500 for beach house rental and  expenses, I need to
save $62.50 per month for this  goal. And Holiday Gifts I spend
$800 a year.  I need  to save $67 a month to in my budget for gifts.
Medium Term Goals (may take a few years to  accomplish)
Emergency Savings – 9 months of essential living  expenses is
$22,500 (I did not include discretionary spending here; those
things that I can cut out of my budget would be cut out if
emergency comes.) I am approximating 10 years for this goal so I
will save $187 a month. When I can do more, I will. European
Travel - $8,000 is my estimation for a few weeks in Italy (my
dream vacation.) I am giving myself five years to so that is $133 a
month. Long Term Goals (many years from now) Retirement
Savings, I have been saving anywhere between 7% and 10% of my
income in an employer’s 401K since I was in my twenties so this is
a long term goal that is in progress. It’s doable.  If you have not
signed up for the 401K at your work please do.  Many employers
will match up to a certain percent and the amount that you put
into your 401K is not taxed.  This item is taken out of my paycheck
automatically so there is no need to put it in my budget. See your
benefits administrator at work to sign up. If you work for yourself
you can still get the tax benefit with an IRA, a SEP or SIMPLE
account.  Now I don’t have to save for all my goals at once I can
gradually add in goals as I accomplish others. There are some
things to remember when you’re choosing goals. An effective
action plan will include goals that are specific, measurable,
achievable, and have a time limit.  If the goal is not realistically 
achievable, we are setting ourselves up for failure and
disappointment.  If the goal is not specific  enough, you may not
know when the goal has been  accomplished.   Looking at the big
picture the goal can sometimes be too overwhelming.  Try to set
up an action plan to achieve your goals. An action plan is a to do
list of  steps. Your action plan should have many small steps  that
are not imposing. When we achieve these smaller  steps, we will
likely feel more confident in our abilities  and we will stay
motivated to complete more of the  smaller steps until the bigger
goal is doable.   People who are invested in their goals are more
likely to stay motivated. Read over the goals you wrote down do
they excite you? If not, why not.  Perhaps you  should readjust
your goal to something that will  keep your interest.  If it is a goal
you believe in you are more likely to follow through and achieve
that  goal.  For example you have chosen paying off a  credit card
balance as a goal but it is not motivating  you.  Perhaps thinking
about what you would  spend the money on once the balance is
paid off,  would motivate you.  In this case paying the credit card
balance is not the real goal. It is just one of the  steps needed to
be achieved so  you have the money to do something that will 
motivate you.  You may be motivated by articulating your goals Or
keeping visual cues that remind you of your  goals.   For example if
your goal is to go to Hawaii  or buy a new car find pictures to
remind you of  your goal and  put them in places that you  will see
them every day. Writing goals down is  another way to help you
keep them front and  center.   Okay now that we know our goals
it’s time to  put our daily expenses down on paper to come up
with a day to day, month by month plan to spend our money. We
need to make sure that our spending plan or budget is
constructed in a way that our needs and goals are accounted for
in the plan. Before we start to put in the numbers that will make
up our monthly budget let’s  remember to consider needs versus
wants.   Because when push comes to shove we may find  that
while we want many things we may not need that much. And then
the big decisions come into  play.  Do you buy what you want at
that moment  or work toward your goals?  We each need to make
these decisions daily but working on the spending plan and then
spending according to your plan is going to work, really it will.
Here is an example of a couple working effectively on their goal of
a new car.  Thanks for being here guys. No problem.  Sure. You've
agreed to talk about your goal of getting a vehicle to replace the
one you have now. I'm going to ask you some questions to see if
you've followed  the 5 steps for successful goal setting-- to see if 
you've really "set to get". First, do you want to buy  or lease?
Well, we want to buy, because at the end  of a lease, you don't
have anything. I agree; buying is usually best. Now are you looking
at new or pre-owned vehicle? Well, we want a used car, but one
that's not too old, and one with a warranty. We found one that's
only 2 years old with only 30,000 miles on it.  Great, you've done
your homework! Do you plan to pay cash, or do you plan to
finance the car on credit? And how soon do you need this  car?
Well, we'd rather not have a car payment, but we don't have the
money to pay cash. And we really need  the car now. If our car
breaks down on the way to  work one more time, I might lose my
job! Wow!  Do you know how much car payment  you can you
afford?  If we cut back to basic cable  and reduce getting take-out
food and pizza,  we can save about $120 a month. And if we both 
pack our lunches every day, we can save another $200 a month.
Don't forget about the repairs. Oh, yeah! Looking at what we've
spent and continue to spend on repairs to our current car, we can
save another $90 a month. And that's not even counting  any
savings on gas. So with all of that considered,  we could save $410
a month from our current  budget. So we can swing a car payment
of $400. Wow! Good work!! Have you considered any  obstacles?
Yeah, we have. We know we're usually short on times in the
mornings, so we need to pack our  lunches the night before. If we
don't, we end  up spending money on lunch. And at the end of
the day when we're tired is when we're more  likely to order pizza
or get take out food. But, we're committed to getting this car and 
making it work! So we're taking turns each  night packing lunches.
We also bought a slow  cooker that we can set up at night.  In the
morning we just plug it in, so dinner's ready  when we get home.
Tom, Donna, you've really thought this through.  You needed a
new car, and you made it your goal.  We can all learn from the
way you followed the  five steps for effective goal setting.  You
identified  your goal, and you made sure it was specific and
measurable by making all the decisions about what car you
wanted and how you'd pay for it.  Goals do tend to fail if they're
not specific and  measurable. Just saying, "I want to save more
money" is neither. You need to say how MUCH money you want 
to save and over what period of time. I've always said "I want to
save more money,  but yeah, you're right.  I should say something
like "I want to save $1000 by the end of the year". Exactly, that's
both specific and measurable. The next step in reaching a goal is
to be sure that  it's achievable and challenging--Not too easy, but
not too hard. Finding that balance can be  tricky. You both know it
won't be easy, but you've committed to the changes you'll need 
to make to afford the car payments. How can you tell if your goal
is TOO challenging? Great question! If you can't even imagine
yourself making the changes necessary to achieve your goal,  then
it's probably too challenging. And that leads  into step four, where
we anticipate obstacles.  Tom and Donna, you identified some of
those obstacles  already, and you found some solutions to get
around them. I think you guys are well on your way to getting that
car! This has been a terrific example of how goal-setting really
works!