Reaching Your Financial Goals

The cost of most things doesn't remain stable over time.Prices go up thanks to inflation.How will this affect how you price your goals? For short-term goals,inflation isn't really an issue.The amount you determine to save today for furniture you won't actually buy for another 18 months will not be affected.(Not by much,anyway.)

Medium and long-term goals are different.Let's say you are saving to put a down payment on a house in five years.Using today's prices,you figure you need $30,000.Over those five years that you'll be saving,though,housing prices may rise sharply.At the end of your five-year saving period,you may discover that the down payment needed is now $40,000.You will have reached your original goal,yet you still won't have enough money for a down payment on a house.

To guard against this situation,you may want to factor in inflation when calculating the cost of your goals.This isn't quite as complicated or confusing as it sounds even for those among us who are severly math challenge!Simply scan the financial pages of the newspaper or listen to the news on TV for an inflation forecast.(Financial experts love to forecast the rate of inflation.)Take that number,let's say its 3% annually,and multiply it by the current cost of your goal.Add the result to the current cost.Repeat for every year that you need to reach your goal.The result is your inflation-adjusted price.