It’s hard to plot out every goal you want to accomplish in your long life — especially if you’re in your 20s, 30s, or 40s right now.
You have decades of life to live ahead of you, and these are the prime decades to experience some major life milestones and changes.
Trying to understand exactly what you want in 5 years is hard enough, so how are you supposed to understand what financial goals your 50- or 60-year-old self will be happy to have accomplished after decades of working toward them?
The truth is, planning is only guessing. That doesn’t mean it’s not useful. The best plans are based on well-educated, highly-considered ideas.
But at the end of the day, plans aren’t set in stone because life changes. You’ll change, and you need your plan to be flexible enough to change with you.
The Importance of Flexibility in a Financial Plan
This is especially true with your financial plan. That’s why financial planning is not a one-time event that produces a static document based solely on facts and numbers.
It’s a dynamic process that requires regular review and updates to make sure you’re staying on the right track to what you want.
Which brings us back to your goals — and figuring out how you’re supposed to know in your 30s what you might want in your 60s.
Why Setting Specific Financial Goals Can Be So Hard
It’s a challenge because you likely know you’ll want something at some point in the future that will require you to start working toward it now.
Maybe it’s a vacation house on the beach. Perhaps it’s the ability to travel around the world. Maybe you’ll want to turn a hobby into a small side business that doesn’t necessarily need to pay all your bills — and doesn’t have to, because you saved enough to pursue this passion after you retire from your career.
Again, we’ll all want to enjoy something. But setting specific financial goals can feel challenging when you’re not entirely sure what that something is, or will be.
And this doesn’t have to apply to things decades into the future. You could make great money now, feel happy with where you are in your life, and think there’s no need to set specific financial goals because you have everything you want.
Might as well enjoy that money you make and spend it for today, right?
Sure, you should enjoy yourself. But you can balance that with being responsible for tomorrow at the same time — even if you’re not positive what you want 5 years from now, or even next year.
You Don’t Need Specific Financial Goals, But You Do Need a Wealth-Building Account
Still sound hard to do? Here’s the good news: you don’t necessarily always need to have specific financial goals in mind to work toward.
I know, sounds a little blasphemous when coming from a financial planner who helps clients set goals as part of the overall planning process!
But I only say that if what you have instead is a Wealth-Building Account.
What’s a Wealth-Building Account, and How Does It Work?
A Wealth-Building Account is what I call an individual, taxable brokerage account with a specific purpose: this account is for the times when you don’t have a detailed goal you’re striving to achieve, but you still want to save for a future you want to enjoy.
Say you’re in your mid-30s. You have a great job, you make good income, and you’re generally happy with your lifestyle. You contribute to your retirement accounts and maintain emergency savings.
You have money left over at the end of each month — but no specific financial goals to put that money toward right now. Instead of just adding that money to your spending, you could contribute it to a Wealth-Building Account.
You may not know if you want to save for a house or to take a year off and travel. Maybe you’re not sure if a traditional retirement is right for you, or if you’d prefer to achieve financial freedom instead.
The specifics don’t matter as much as recognizing that you will eventually want to have something in the future that you really value — and that may require a lot of money. The Wealth-Building Account is where you save for that.
You could call that brokerage account anything you wanted. It could be your Freedom Fund. It could be your Ability to Choose What I Want account.
Call it whatever resonates with you and reminds you that even without a specific financial goal in mind, you can still save and invest for the day when you do know exactly what you want and you’ll need a good amount of money to achieve it.
It’s all about creating flexibility and choice. Keep that in mind for the times when you’re not striving hard for something specific — but still want to plan responsibly for tomorrow.
Putting a little money away each month into a brokerage account for “someday” will pay off in a big way when you eventually get the opportunity to obtain something important to you.