Setting your financial goals is a two-pronged decision making process. You not only need to have set your destination -- that is, how much you want to make -- you need to be practical about how much you have to make it with.

As the old saying goes, "it takes money to make money." But you don't have to be rich to make money, you need to be wise.

Compounding
Few people realize just how powerful the effects of compounding can be. Your bank, of course, and your loan agencies realize it, and use the compounding effect to their benefit. In fact, that's their business!

If you started today with a penny today and doubled it every day, you would have a million dollars in only 28 days! If you could double it every month, you would be a millionaire in only 28 months. Why not put that compounding power to work?

The following table illustrates how many years it takes to get $1,000,000, depending on your starting capital and how fast the money grows.

                                Annual Growth Rate
Starting Capital    5%   10%   20%   30%   40%
$ 1,000                143     74      39     28       22
$ 2,000                129     67      36     25       20
$ 5,000                110     57      31     22       17
$10,000                96      50      27     19       15

The lesson to learn from the table above is that you should start saving early for your retirement, and let it compound in a high-growth instrument, like the stock market or mutual funds.

Trends
Don't just follow your friends when it comes to the trendiness of investment strategies. What your neighbor, or the cab driver, or your hair stylist is doing often turns out to be the final signs of a decaying market. It is better to invest continually and regularly than to try chasing the latest fads. Unless you are a professional trader, who spends much of his or her day working the stock market, don't try to pick tops and bottoms.

Tithing
No matter how much -- or how little -- you make, you will manage to spend it all. It is incredibly easy to fall into this trap. Your best bet for financial success is to allot 10% of your income to an investment plan, no matter what you make. As you grow in your profession and earn more money your investment allotment will get larger. It is good to start this habit early, say with your first job in high school, so you have a regular commitment for the rest of your life.

For more in-depth information about goals and plans, or to browse archives of this column, feel free to visit The Money Mentor.

  -- Sunny J. Harris