Beginner's Guide to Financial Goals

To achieve your dreams, it's very important that you write your goals down so that you can refer to them often. Then, sort them according to a time frame -- short-term vs. long-term, because you will need to save for them differently. Finally, post your goals on the bathroom mirror or refrigerator, so you will have a constant reminder to stay focused!

Kathleen's Dreams

Kathleen, a 35-year-old working mother of two, thought about where she wanted to go and mapped out her financial goals by writing a mission statement that would keep her on the right path.

Kathleen's mission statement: "I'm tired of worrying about money. In the next two years, I want to have an emergency fund with six months of savings, in case my car -- or job! -- collapses, and get rid of the credit card balance I've been carrying since college. In 10 and 15 years, I want to be able to send Harry, now 8, and Amanda, 3, to college. My ex is not in a position to contribute to a college fund, so I will be responsible for all education expenses. I want to think about my 'Golden Years' without feeling scared that I won't have enough money to live on. With 30+ years to save, I want to learn how to invest in the stock market, so I'll have enough money to see my dreams come true."

Kathleen has big dreams she wants to fund. By mapping out her goals, she has come to realize something very exciting.

In her case, she has the time to invest in the stock market as a way to reach her goals.

Everyone's situation is different. For example, different short- and long-term goals (a new car next year compared with a child's college education in seven years to retirement in two decades) need different investing vehicles to achieve different results, or returns. If you're looking at a goal five or more years on the horizon, then investing in the stock market is a smart decision because, despite the risks that can and will occur, you have the potential to earn more money, because you will have the time you need to ride out the market's ups and downs.

But you're not ready to invest your first dollar until you're much more comfortable with risk and know what you can do to manage it.

Next: Discovering Your "Risk Zone." To get a head start, click here.