1

fnancial planning
& goal setting
PERSONAL FINANCE
2
The mission of The USAA Educational Foundation
is to help consumers make informed decisions by
providing information on financial management,
safety concerns and significant life events.
our mission
1
The Power Of Planning ........................................................ 02
Step 1: Identify Your Financial Goals .................................. 04
Step 2: Calculate Your Net Worth ........................................ 07
Step 3: Identify Your Sources Of Income ............................ 10
Step 4: Assess Your Resources .......................................... 14
Step 5: Save For Your Goals ............................................... 16
Step 6: Plan Ahead .............................................................. 20
Step 7: Update .................................................................... 22
table of contents
2
Many things can affect the quality of your retirement.
Changes in employer-sponsored beneft plans, economic
events that force an early retirement, investment perfor-
mance, rising health care costs, an unanticipated long
term care event, and potential future changes in Social
Security benefts are all beyond your control. Thats why
its important to control what you can, by mapping out your
fnancial plan and revisiting it on a regular basis. Financial
worries arent necessarily caused by a lack of money, but
from a lack of planning. Solid fnancial planning can help
take the uncertainty out of your fnancial future and provide
a process that allows for course correction as circum-
stances change.
The purpose of this publication is to help you begin the
process of establishing fnancial goals and structuring your
fnancial plan. You can use it as a tool to identify the many
things you need to consider in developing your own plan.
Or, if you seek the advice of a Certifed Financial Planner

(CFP

) practitioner, these completed forms will facilitate the

consultation, and help the professional align your budget
and investments with your personal goals.
2
the power
of planning
2
Today, individuals are living longer and healthier
lives. That means its more important than ever
to develop a fnancial plan that will help you enjoy
a longer and more active retirement. This book
provides seven steps, with helpful work sheets,
that you can follow to identify your goals and
establish a fnancial plan for a secure future.
3
Certifed Financial Planner Board of Standards, Inc., owns the certifca-
tion marks CFP and Certifed Financial Planner in the U.S. which it
awards to individuals who successfully complete CFP Boards initial and
ongoing certifcation requirements.
step one
IDENTIFY YOUR
FINANCIAL GOALS
step two
CALCULATE YOUR
NET WORTH
step three
IDENTIFY YOUR
SOURCES OF INCOME
step four
ASSESS YOUR
RESOURCES
step five
SAVE FOR
YOUR GOALS
step six
PLAN
AHEAD
step seven
UPDATE
3
STEP 1:
identify your
fnancial goals
Youll want to select someone you trust com-
pletely. This person could be your spouse,
a parent, a friend or a fnancial planning profes-
sional. Whoever it is, youll want to make sure
that person is capable of managing your family
fnances accurately and responsibly. Once
youve chosen someone, familiarize this indi-
vidual with all aspects of your fnancial situation.
Determine
your goals
The best way to start saving is to have
a clear idea of what youre saving for.
When your fnancial plan includes spe-
cifc savings and investment goals, you
have something to work toward and
that can help keep you focused.
It is recommended that you target at
least 10 to 15 percent of your net in-
come (i.e., take-home pay) to save and
invest each month. Generally, the best
way to achieve this goal is to pay your-
self frst by establishing an automatic
withdrawal that goes directly from your
paycheck to a savings or investment
account each pay period.
4
5
Financial planning involves a bit of soul searching to
prioritize your wants and needs. Consider the following
steps to help you defne, plan and begin saving to meet
your fnancial goals:
Examine Your Current Financial Situation
Are you spending less than you earn?
What is your net worth?
Defne Your Goals
What do you want to accomplish? What will happen
if some of your goals are not accomplished?
Set An Amount
How much money do you need to achieve each goal?
Set A Target Date
When do you need to meet your goal?
Write Down Your Goals
Listing them in black and white can help you assess what
you really need or want.
Prioritize
This will help you follow a clearly focused plan.
Develop A Plan
Establish a budget that includes your fnancial goals.
Review Your Progress
Periodically review your plan and make
adjustments as necessary.
0-3 years
Establish and implement a spending plan for income so
you spend less than you earn.
Create an emergency fund of at least 3 to 6 months of
basic living expenses.
Establish a good credit reputation.
Pay off your high interest rate debt.
Implement a disciplined savings and investment plan.
Purchase a vehicle.
Purchase insurance coverages appropriate for
your situation.
Prepare and execute your will and power of attorney.
Save for a family vacation.
3-7 years
Make the down payment on your home.
Plan for a wedding.
Prepare for the birth or adoption of a child.
Provide for your advanced education.
7+ years
Plan and save to meet your income, healthcare, and
long term care needs in retirement.
Plan and save to meet your housing needs in retirement.
Provide for your childrens college education.
Plan to support aging parents.
5
6
fnancial goals
work sheet
-3 Years
Time $ Needed Time $ Needed Time $ Needed
3-7 Years 7+ Years
GOALS
New vehicle
down payment
Down payment
on home
Retirement
2 years
5 years
20 years
$10,000
$40,000
$100K
This Financial Goals Work Sheet is offered as a tool
you can use to articulate and list your fnancial goals.
For example, if your goal is to buy a home, you may
list down payment on a home as your goal. Next,
set the target date for when you would realistically like
to accomplish the goal and list it in one of the three
timeframe columns. Finally, determine the amount of
money you will need. Record the amount required next
to your planned goal accomplishment date.
When you complete the Financial Goals Work Sheet,
you are ready to proceed to Step 2.
7
STEP 2:
calculate your
net worth
Once you have articulated your financial goals,
the next step is to determine the resources
you will need to help you accomplish those
goals. This requires an objective assessment
that results in a list of the items of value that you
own (assets) and the amount of money you owe
(liabilities). Knowing your net worth is important
because it keeps you in touch with your money
and is a quick and simple way to determine if
you are making progress towards accomplishing
your goals. By completing the Personal Finan-
cial Statement form included here, you can cal-
culate your net worth. First, add up the value of
your assets your home, investments, jewelry,
etc. Then add up the amount of your liabilities
loans, mortgages, credit cards, etc. Subtract the
amount of your liabilities from your total assets to
determine your net worth. Be sure to use actual
market values what your property would be
worth today if you decided to sell it and what
your loans would cost you today if you decided
to pay them in full.
7
8
ASSETS $ VALUE
Cash
Checking accounts
Saving accounts
Money market accounts
Certifcates of deposit (CDs)
Cash value of life insurance policies
Retirement plans
Pension/proft-sharing plans
(money owed you if you leave your employer today)
Keogh plans
IRAs
401(K)
Emergency fund
Stocks/Bonds/Mutual Funds
Real estate investments
Money owed to you
Rental or vacation property
Miscellaneous property
Other investments
Your home
Vehicles
Furniture/appliances
Jewelry/furs
Collectibles/artwork
Other
Total value of all assets $
personal financial statement
9
LIABILITIES $ OWED
Mortgages
Personal loans
Vehicle loans
Credit cards
Education loans
Investment loans
Life insurance loans
Other
TOTAL LIABILITIES $
CALCULATING NET WORTH
Record the total value of all assets $
Less total liabilities - $
NET WORTH* = $
*If your net worth is negative, you may need to focus on cutting your spending and repaying your debts.
personal financial statement pt. 2
10
STEP 3:
identify your
sources of
income
Net worth is just one aspect of your financial situ-
ation. Once you have completed your Personal
Financial Statement and have a sense of your
net worth, you are ready to identify the income
resources available to help you achieve your
goals, plan for expenses, and create a working
monthly budget.
Income from resources such as salary, invest-
ments and retirement are important in helping
you to achieve your financial goals. Also include
any regular, supplementary sources of income,
such as a part-time job. When calculating your
personal finances, be sure to include income
from all of these resources. After you determine
how much is coming in, be realistic in recording
how much is going out and where it is going.
The Budget Work Sheet is a tool to help
you estimate your current monthly income
and expenses. Youll probably want to have
your bank statements and credit card account
statements handy for quick reference.
Recording your expenses and analyzing your
spending habits is a good practice. It can help
you identify where to make adjustments so you
spend less than you earn bringing you closer
towards accomplishing your fnancial goals.
When you have completed the Budget Work
Sheet, you are ready to move on to Step 4.
Create your
spending plan
10
11
budget work sheet
INCOME FOR THE MONTH OF: AMOUNT
Monthly gross income (total income before deductions) = $
Other income (interest, etc.)
Total Monthly Gross Income = $
DEDUCTIONS
FITW - Federal Income Tax Withholding (if applicable) $
SITW - State Income Tax Withholding (if applicable)
FICA - Social Security
FICA - Medicare
Other deductions (for example, Flexible Spending Account)
Total Deductions = $
Total Monthly Net Income (total monthly gross income minus total deductions) = $
EXPENSES AMOUNT PLANNED ACTUAL
CHARITABLE GIVING
Place of worship $ $
Other
SAVINGS/INVESTMENTS (target at least 10% - 15% of monthly net income)
Emergency fund $ $
Retirement accounts (IRA, 401(k), etc.)
Other
HOME/UTILITIES
Food $ $
Rent/Mortgage payment
Property taxes ( of total annual expense)
Utilities
Home maintenance
Furniture
12
budget work sheet pt. 2
EXPENSES (CONTINUED) AMOUNT PLANNED ACTUAL
Phone/Mobile phone
Internet service provider (ISP)
DEBT
Credit cards $ $
Loans
INSURANCE
Auto $ $
Property (renters, homeowners)
Health
Life
Long-term care
Disability
EDUCATION
Tuition $ $
Room/Board/Travel
Books/School supplies/Uniforms
TRANSPORTATION
Vehicle payment $ $
Gasoline/Parking/Tolls/Public transportation
Vehicle maintenance
Registration/License fees ( of total annual expense)
PERSONAL
Clothing $ $
Laundry/Dry cleaning
Grooming (hair care, toiletries, etc.)
Child care (baby sitters, child care center)
13
RECREATION/ENTERTAINMENT
Vacations (1/12 of total annual expense) $ $
Entertainment/Dining out
Hobbies (for example, golf or tennis equipment and fees)
Club fees/Organization dues
Cable/Satellite television
TOTAL MONTHLY EXPENSES = $ = $
CALCULATE MONTHLY CASH FLOW AMOUNT PLANNED ACTUAL
Total Monthly Net Income $ $
Less Total Monthly Expenses - $ - $
Net Cash Flow (Defcit)* = $ = $
budget work sheet pt. 3
* If your net cash fow is positive, you can save more for emergencies or other fnancial goals. If negative, you will
have to cut expenses or increase income (by taking a second job, for example) to reduce or eliminate debt.
14
STEP 4:
assess your
resources
Now that you have identified your financial
goals, calculated your net worth and determined
your income, the next step in developing your
financial plan is to assess all of your other
resources that is, any emergency funds and
insurance policies that will help protect you
against unexpected setbacks.
This assessment should begin with a look at
your fnancial foundation the savings and
insurance coverage you have in place to protect
you when unplanned events threaten to keep
you from meeting your goals.
A strong foundation begins with an emergency
fund of easily accessible savings. Most experts
recommend that people set aside a fund that
covers at least three to six months of basic
living expenses to offset such events as sick
leave, unemployment or unexpected bills.
If you dont already have an adequate
emergency fund, consider making it a priority on
your list of fnancial goals. Keep your emergency
fund in a liquid account one that makes it
easy to quickly access your cash such as a
savings or money market deposit account.
CONTINUED
Emergency funds
and insurance
14
15
CONTINUED
Even an emergency fund cannot prepare you for catastrophic
loss or illness. Most individuals buy insurance for these
costly emergencies. The most common types of insurance
include: auto, property (renters, homeowners), health, life,
long-term care, and disability.
It is important to review your current coverages at least
annually to determine if you have adequate protection.
For health and disability protection needs remember to
factor in coverages such as Medicare, Social Security
Disability Insurance and workers compensation insurance.
For life insurance protection needs exercise caution when
factoring in coverage provided through your employers
group plan. Before factoring in such coverage consider
the following:
If you change jobs, will your new employer offer
group life insurance coverage?
If you do not have access to group plan life insurance
coverage, has your health declined to a point where
individual life insurance premiums are too expensive?
Are you even insurable? Will your current employer offer
you the opportunity to convert your existing group plan
life insurance coverage to an individual policy at a much
higher premium?
If you become disabled and begin receiving long term
disability benefts, will you lose your employer provided
group plan life insurance coverage? Will your current
employer offer you the opportunity to convert your existing
group plan life insurance coverage to an individual policy at
a much higher premium? Consult your employer for details.
You should also contact your attorney regarding your estate
planning documents; these typically include a will, durable
power of attorney and health care directives.
15
STEP 5:
save for
your goals
Once you have secured your financial foundation
protecting yourself with an emergency fund
and adequate insurance you are ready to
begin saving and investing for your financial
goals. This requires you to identify the gaps
between your financial goals and your available
resources. Once youve taken an objective
look at these, youre positioned to find ways
to combine the two.
This tool helps you develop a real-world plan to
achieve your fnancial goals by breaking them
down according to how much and by when.
For example, you probably dont expect to pay
cash for a house but should have an idea of
when you want to be in position to make a
down payment. Your need for a car, or to pay
off education bills, may be more pressing.
Completing the
Savings Goals
Work Sheet
16
17
Here are guidelines for using the Savings Goals Work Sheet:
GOALS
Record the goals you listed on the Financial Goals Work Sheet
in Step 1.
TARGET DATES
Record the target dates of your goals.
AMOUNT NEEDED
Estimate the amount needed for each goal using todays dollars.
Example: If your goal is to make a 20 percent down payment on a
home valued at $200,000 today, you would need $40,000 for the down
payment. You would enter $40,000 under Amount Needed even if
your target date is several years away.
CURRENT ASSETS
Identify any assets on your Personal Financial Statement from Step 2
that you are willing to commit to your goals. Then, indicate how much
you would like to allocate to each of your goals. Example: If you have
$20,000 saved in a money market deposit account, you may decide to
allocate half of it to the down payment. In this case, you would write
$10,000 under Current Assets.
GAP
Indicate the gap between the cost of each goal and the assets you have
allocated to it.
NUMBER OF YEARS TO TARGET DATE
Enter the number of years between now and your target date.
AMOUNT TO BE SAVED EACH YEAR
Divide the gap amount by the number of years to the target date.
That amount will be what you need to save each year to reach your goal.
TOTAL
Add all the amounts to determine the total amount you will need to save
annually to reach your goals. This amount does not account for interest,
appreciation or depreciation on assets which are committed
to your goals.
17
18
savings goals work sheet
TARGET
DATES
AMOUNT
NEEDED
GAP
CURRENT
ASSETS
NO. OF
YEARS TO
TARGET DATE
AMOUNT TO
BE SAVED
EACH YEAR
GOALS
Down payment
on home
October
2018
$40,000 $10,000 $30,000 $6,000 5
19
Finding
the gaps
Now look back at the Savings/Investments line on your
Budget Work Sheet from Step 3. How does the amount
you are currently saving compare to the amount you have
determined you should save each year in order to reach
your goals?
Use of the Savings Goals Work Sheet can encourage you
to work on your goals today. It assumes your pay increases
and returns on investments will only keep pace with the
rate of infation. Some individuals discover they are saving
more than enough to meet or exceed their goals but
for many, this isnt the case, and increases in savings are
needed to keep up with infation.
Adjusting your plan
If the amount you are now saving falls short of the amount
you need to save to reach your goals, try asking yourself
these questions:
Are you paying yourself frst, with a disciplined saving
and investment program that saves at least 10 percent
to 15 percent of your net income?
Could you increase the amount you are saving?
Could you earn more and spend less?
Are you spending too much on impulse purchases and
neglecting long-term savings goals?
Are your goals too ambitious?
Could you change or eliminate any of your goals?
Could you delay any target dates of your goals?
What is the impact on you and your family if your goals
are not accomplished?
With these questions in mind, take another look at your
Savings Goals Work Sheet (Step 5) and at your Budget
Work Sheet (Step 3). Make adjustments in both until your
actual savings is equal to your goal savings. When you have
completed your adjustments, you should have a savings
plan for the current year and a forecast for your future.
Its important to repeat this exercise annually and adjust
as appropriate. If your income increases for example, if
you receive interest and dividends, unexpected bonuses or
fnd other ways to accelerate your savings then you will
be able to accelerate your progress toward your goals. Be
prepared to modify your goals if you suffer a setback. The
key is to remain fexible.
20
STEP 6:
plan ahead
Now that you have completed your
analysis, it is time to create your action
plan. This means refining both your
savings plan and your investment
plan to optimize progress toward
your financial goals.
Your Savings Plan is essentially a commitment
you make to yourself regarding both the amount
you plan to save and the method you will use to
save it by month and per year. An effective
savings plan begins by writing out these basic
elements:
Your savings plan
21
Start saving early. The earlier you begin, the more
money you can potentially accumulate.
Amount to be
saved this year
Commit to specifc savings methods. Establish
an automatic savings plan, such as having
money deducted from your pay or your bank
account and deposited in a savings account.
Describe
your methods
Watch your expenses; save any pay increases.
Either put the money into your retirement plan or
into another savings plan. Watch your expenses;
save any pay increases. After your emergency
fund is established, direct savings to your
employer sponsored plan taking full advantage
of any employer matching contributions before
saving for non retirement goals.
Amount to be
saved each month
Next, examine your fnancial goals (listed in Step 1) to
determine whether each is a short-term (less than three
years), intermediate-term (three to seven years) or long-
term (more than seven years) goal. This will be determined
by the length of time you have until the goals target date
or until you will need the money allocated to that goal. For
example, if you want to save for a childs college education,
and the child is 8-years old,that would be a long-term goal
that you want to start saving for right now.
For each of your goals, consider how much investment
risk you are willing to take for the goal, given its timeframe.
Do you want to set up a simple savings account, or a
longer-term investment in something like stocks or bonds?
Generally, the riskier an investment, the more it fuctuates in
value. Generally, its potential return may be greater, but so is
its potential loss.
To determine how much risk you are willing to take for each
of your goals, consider the following:
How essential is the goal?
How long before your savings will need to be allocated to
the goal?
Can you afford to lose any or all of the money you
are investing?
Do you want to protect that money even if it means
potentially lower returns and not accomplishing 100
percent of the goal without saving more?
A fnancial professional can help you set up an investment
plan that matches your resources, goals and risk tolerance.
This option is discussed in the next step.
Your investment plan
21
22
STEP 7:
update
A good time for your annual review is when
preparing your federal income tax return,
because you will have your fnancial records
readily available.
Evaluate your life-long goals and anticipate the
following economic factors that affect your plan:
Rate of infation
Your federal income tax bracket
Interest rates
Overall economic conditions and the impact
these have on your current fnancial situation
Assess your resources and update your work
sheets, so you can see what adjustments you
need to make to stay on track with your
fnancial plan.
Your fnancial plan, just like your real-world
fnancial situation, is subject to change.
Make it a point to review your fnances
and adjust your goals and plans for
reaching them at least once each
year and at signifcant life events
such as marriage or divorce, the birth
or adoption of a child, a job promotion
or unemployment, the purchase of a
home or other property, relocation,
or the death of a spouse or heir.
22
23
Consider professional
assistance
Many things can interfere with your ability to initiate a
solid fnancial plan and for many people, choosing
the right investment plan is pretty intimidating. You may
want to consider working with a CERTIFIED FINANCIAL
PLANNER

(CFP

) practitioner if:
You want to improve your overall fnancial situation
but do not know where to start.
You would like a professional to evaluate your
existing fnancial plan.
You need fnancial advice on investment, risk
management, or estate planning strategies.
You need fnancial advice that addresses changing
family circumstances.
You have experienced a signifcant life event.
You do not have time to build your own fnancial plan.
You need help balancing multiple goals and
limited fnancial resources college planning vs.
retirement planning.
SELECTING THE RIGHT FINANCIAL PLANNER
Dont be afraid to ask questions:
Ask people you respect for names of fnancial planning
professionals they have worked with.
Ask about the fnancial planners background and
work experience.
Ask the planner as many questions as you need to
understand and feel in control of your fnancial future.
A true professional will encourage questions and show
interest in tailoring a plan to meet your needs.
Facing the future
with confdence
Financial uncertainty can cause worry and needless stress.
Using these recommended seven steps to understand your
fnancial situation and plan your fnancial future may seem
intimidating at frst, but ultimately, it can lead to true peace
of mind. You may not be any richer, but knowing where your
fnances stand right now, where you would like to be, and
what resources you have to make that possible, will help
you face the future with confdence.
23
24
Making Money Work For You
Financing College
Managing Credit And Debt
Buying Or Refnancing
A Home
Basic Investing
Planning For Retirement
Managing Assets And
Expenses In Retirement
can help you look out for the
best interests of your family or
organization with useful,
free educational information.
access more free
educational materials today
Visit usaaedfoundation.org to download digital versions or to
order up to 250 printed copies of select publications or videos.
Please call (800) 531-6196 if you would like more than 250 copies.
There is no charge for shipping. Some titles are not available in print.
25
usaaedfoundation.org
FOR MORE INFORMATION PLEASE VISIT:
26
This publication is not intended to be, and is not medical, safety, legal, tax or
investment advice. It is only a general overview of the subject presented. The USAA
Educational Foundation, a nonprofit organization, does not provide professional
services for financial, accounting or legal matters. Applicable laws are complex, the
penalties for non-compliance may be severe, and the applicable law of your state
may differ. Consult your tax and legal advisers regarding your specific situation.

The USAA Educational Foundation does not endorse or promote any commercial
supplier, product, or service. The Department of Defense, its military branches (Army,
Marine Corps, Navy, Air Force and Coast Guard) and other governmental agencies
do not endorse or favor any of the information, products or services contained in this
publication.

USAA is the sponsor of The USAA Educational Foundation. The USAA Educational
Foundation www.usaaedfoundation.org is a registered trademark. The USAA
Educational Foundation 2013. All rights reserved.
70511-0913