What to Do When Financial Goals Aren’t Affordable

What to Do When Financial Goals Aren’t Affordable

6 second take: If your financial goals appear to be unachievable, don’t give up. Consider these four strategies to meet your money benchmarks.

Not all financial goals appear achievable or realistic at the start. Many people meet with a financial advisor or use some other method of determining their goals only to find that their goals don’t appear affordable.

There’s just not enough money available to invest at that rate. Something has to give. But there are options available.

The Four Direct Options for Meeting Financial Goals

Goal shortages can be met directly in four ways. Allocating more funds is the most direct way to approach a goal shortfall, except that funds aren’t unlimited. Delaying the goal reduces the funding need by allowing more time to save or invest.

Reducing the amount of an unrealistic goal also makes achieving it easier or more realistic. And the investor can choose to be more aggressive in his or her investment approach.

Allocating Additional Funds

The problem with allocating additional funds is that we run out of money way too soon. We may have a few hundred dollars a month leftover but need over a grand to meet the goals. Even when discretionary expenses are slashed, there’s still not enough.

Slashing discretionary expenses isn’t always a good idea either. Often when people go to an austerity budget, they live frugally for a while, then revolt. They reward themselves for their frugality with something more expensive than what they’ve saved.

Frugality works for some over the long haul, but it isn’t a good mainstream long-term solution.

Reducing expenses can help by freeing up some dollars. Drastically slashing expenses rarely works.

Delay the Seemingly Unrealistic Goal

This technique works wonders but isn’t very popular. People don’t like to delay their financial goals. Some goals, like early retirement, may be best postponed if not affordable. Other goals, like education funding, don’t lend themselves to postponement.

Delay can work well for very discretionary goals. Saving for a boat or a vacation home may become a lot more realistic when pushed out even a few years. Postponing an accumulation goal from three years out to six years out cuts the monthly savings need by over 50 percent.

Goals we view as nondiscretionary are less amenable to postponement. We can push out retirement only so far. Children’s education timing is fairly fixed; we can’t push that out to some future date.

Reduce the Goal

Reducing the goal can work wonders. Sometimes it is really necessary; the goal just may be too big or approached too late. This is common when starting to invest for retirement when retirement isn’t that far away. There just may not be enough time or resources to save for a bang-up retirement in a short period of time.

It may be best to adjust the goal to something more realistic.

Some unrealistic goals can be reduced with great success. Funding two years at a community college and two years at a private college is far more affordable than four years at a private college. Or choosing to fund a state education instead of a private one.

Sometimes emotion gets in the way of goal reduction. If the goal is a 30-foot boat, they don’t want to “settle” for a 28-footer. They want what they want. But if there’s not enough funding something has to give.

Be More Aggressive

The beauty of being more aggressive in your approach to an unrealistic goal or investment is that it is the sole solution that doesn’t require giving something up.

There’s no sacrifice — other than perhaps some loss of sleep if you overdo it.

Being more aggressive, while still being prudent, can have a dramatic impact on long-term goals. It is of lesser benefit for mid-term goals and generally not appropriate for short-term goals.

Being more aggressive means taking more risk in exchange for the potential for greater returns. This needs to be done carefully and by using proven methods and techniques.

Practical Applications

From a practical standpoint, a multifaceted approach is often the best. Reduce a little, postpone a little, save a little more, and be a little more aggressive. Collectively these can work wonders. Two together, three together, or four; putting them together accomplishes more. But what if that’s not enough?

Sometimes there are three or four big goals, all of them important, and just not enough money to get there no matter what.

The first step in this situation is to prioritize. The question to ask yourself is “If I can work on only one of these goals, which one would I choose?” This is the question that determines your number-one priority. This is the goal to fund first.

Often what appears to be an unrealistic goal today can become achievable over time — if we act. Nothing changes if we change nothing. In investing, we often need to walk before we can run.

We need to invest a little and increase that amount consistently across time. We need to invest toward the upper end of our risk tolerance for long-term goals — and avoid excessive risk on near-term goals.

Lifestyle changes can be effective if done in moderation. This is another case of walk-before-you-run. Small changes that last are effective; fast changes that burn out are not.

Most people can achieve far more financially than they believe is possible — they need to establish habits and discipline to put money aside consistently and live within their means.

Budgets and emergency funds are the key tools that keep things on track and going forward.

Being realistic about goals helps, but many people find that they can begin investing for a goal that doesn’t appear achievable and that they get on track after just a few short years. As always, you have to start by getting started.

LendingPoint is an Atlanta-based lender and servicer, redefining who can access money at fair rates.

USA PATRIOT ACT NOTICE: IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.

* Applications submitted on this website may be funded by one of several lenders, including: FinWise Bank, a Utah-chartered bank, member FDIC; LendingPoint, a licensed lender in certain states. Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates ("APR") may vary based upon LendingPoint's proprietary scoring and underwriting system's review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. Loans are offered from $2,000 to $36,500, at rates ranging from 9.99% to 35.99% APR, with terms from 24 to 60 months. Georgia loans have a minimum $3,500 loan amount. For a well-qualified customer, a $10,000 loan for a period of 48 months with an APR of 23.72% and origination fee of 6% will have a payment of $324.48 per month. (Actual terms and rate depend on credit history, income, and other factors.) Customers may have the option to deduct the origination fee from the disbursed loan amount if desired. The total amount due is the total amount of the loan you will have paid after you have made all payments as scheduled.

1. Alimony, child support, or separate maintenance income need not to be revealed if you do not wish to have it considered as a basis for repaying this obligation.

2. The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning FinWise Bank is the FDIC Consumer Response Center, 1100 Walnut Street, Box #11, Kansas City, MO 64106. The federal agency that administers compliance with this law for LendingPoint is the Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.

Click here to see our current list of state licenses

LendingPoint's NMLS #1424139 Visit NMLS Consumer Access