Got Multiple Financial Goals? Prioritize and Start Investing

Question: I am astonished by the columns and articles I see about financial planning. You can find information on retirement planning, college savings, general portfolio diversification and any number of other topics. However, each article and expert addresses the subject matter as if those of us who are saving for retirement do not need to simultaneously invest for college or for other goals.

We want to achieve a financial strategy that balances the requirements of paying for college and retirement while funding a general savings or investment account. We do not want to succeed at one goal at the expense of the others. How does one determine how to distribute money among retirement, college and general accounts?

Answer: Most people are trying to juggle multiple goals with their finances. In addition to the common aims you listed, folks may be trying to pay down debt, build up an emergency fund, accumulate a down payment for a home or pay for a special gift or vacation.

The real work of financial planning is prioritizing those goals. You have to determine which are the most important to you because you may not be able to achieve everything you want with the resources you have available. You may have to choose among your goals or scale down some of your ambitions to achieve a financial plan that works.

Many people, for example, would love to retire early. But they also want to pay for their children's college educations. They may need to push back their retirement date or plan to cover less of the tuition bill or both to make their financial plans work.

Those who start planning and investing early generally will have the most options. Time is quite literally on their side because they have more years for their investments to grow until they need the money. Those who start late will have fewer, starker options; it may take all the money they can save just to eke out a bare-bones retirement, and their kids will have to fend for themselves.

You can try using financial planning software such as Intuit's Quicken or Microsoft's Money to help you figure out how to balance your aspirations. (The latest versions of these programs keep track of all your goals and how they affect each other.) Or you can consult an independent, comprehensive financial planner for help.

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After Kids Graduate, Use 529 for Yourself