Defining Your Dream Life

Setting financial goals makes reaching them easier.

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Dear Alpha Consumer,

I am interested in taking more control of my financial future, but I feel that I'm more ahead of the game then some of my peers. I have a 401(k) that I contribute to, I save regularly, and I am pretty frugal—I learned to use the library instead of constantly buying new books and I love consignment clothes shops—you can dress for less AND have stuff that everyone else isn't wearing.

I don't feel like I'm doing enough , though. A lot of the advice I've found for people my age is for those who have done nothing so far which isn't really me. About eight months ago, I was $3,000 in credit card debt. I had a very restrictive budget and am now debt-free, save my student loans and car insurance. Each week I saved $10 toward various long- and short-term goals—a car, a new computer, vacation, savings, etc.

What advice would you give an already financially aware 20-something person? Should I be saving for a down payment on a home? A future wedding? Retirement? I have almost $5,000 in savings, divided into long- and short-term savings. Short-term savings is really what I put aside to help me get me started in June when I get an apartment and take a summer vacation, but my long-term savings has been a very gray area for me. What exactly am I saving for? Should I put some aside for emergencies and some for long-term goals, or would you suggest just regularly saving into an interest-bearing checking account? Help! I feel like I'm screwing up , but I don't know how!

Your dilemma raises some of the most important questions we can ever ask ourselves: What do I really want with my life? If I had unlimited amounts of money, what would I do with it?

From how you describe the situation, it sounds as though you are not really sure of those answers yet. You are obviously doing a great job with the basics—paying off debt, saving up for a rainy day—but as you suggest, that's not really enough. Because now that you're on top of your money, it's time to take it the next step: using your money to create the life you want.

To help figure it out, try sitting down with a blank piece of paper and brainstorming different ideas. What is your dream life? What do you think about while you're in the shower or doing the dishes? Do you want to take more trips to South America? Or sign up for classes on pottery? If you're a more visual person, flipping through magazines and tearing out the images that appeal to you most can work, too. If you cut out lots of photos of homes, perhaps you want to nest and invest in your kitchen. Or maybe you'll be drawn to photos of nature, and it's time to buy a tent and go camping.

Once you figure out those goals, then you can start working toward them. If traveling is high on the list, then you might want to start saving for a big overseas trip. Or, if you're a beer fanatic, the money could go toward a tour of the Trappist monasteries. Perhaps you will decide that you want to save it all in an emergency fund, so you can have peace of mind knowing you will be fine if you lose your job. Your financial goals will depend entirely on what kind of person you are, and, of course, everyone's will be different.

Meanwhile, while you're still daydreaming, make sure the money is earning interest in a savings account, so you have as much as possible to put toward your dream life, however you define it.

For more information on 20-something personal finance, check out our new website. If you have thoughts on creating your own dream life or tips on how to do it, please share them.