With the beginning of a new year, we hear and think a lot about goal setting. ‘Tis the season for it! Without being cliché, goal setting is both relevant and important for new and experienced investors alike. Benjamin Franklin wisely said, “If you fail to plan, you are planning to fail.” When it comes to living our present and future dreams and goals with financial peace, we must not neglect the ever-important process of planning in the area of our personal finances.
Where do I start?
Start with your hopes and dreams. Take time to reflect on some of these questions. What are your hopes, dreams, wishes? What are you trying to accomplish? What does it mean for you to have financial peace? Do you imagine a future where you are debt free and have enough saved to retire well? Do your future dreams include travelling, taking frequent trips to see the grandkids, giving generously to causes that tug on your heart, or saving enough to start a business?
Indulge your imagination. But don’t stop there. According to Antoine de Saint-Exupery, “A goal without a plan is just a wish.”
How do I create a plan for my financial goals?
Most of you are aware of S.M.A.R.T. goals, an acronym for a “smart” way to set goals. Your financial goal setting should include the following.
1. S - Specific
To say you want financial freedom is vague, but to say you want to be debt free or retire by age 60 is specific.
2. M – Measurable
For example, you could specify that you want to save $50,000 for a down payment on a home. Or you want to maximize your 401K contributions each year so you will be able to retire by age 60.
3. A - Achievable
An achievable goal is one you can attain.Let’s face it, if you are 5’8” and in your 60s, now is not the time to pursue your NBA ambitions.It’s just not possible.Your goals should stretch you but also be attainable.
4. R – Relevant
To determine if your goal is relevant, ask yourself questions like some of the following.Why do I really want this?Is it important that this be done and why?Does this goal really matter to me and my future? The motivation – or the “why” – powerfully drives you to accomplish your goals.
5. T – Time-based
It’s important to give yourself a time deadline.But don’t stop there.Break down your goal into smaller time increments.If you want to save $24,000 by the end of the year, perhaps you could make it a goal to save $2,000 each month throughout the year with smaller time limits that you can measure along the way.Ask yourself, what can I do today to work toward this goal?What can I do this week, this month?
6. Written
If I may be so bold as to add to a well-established acronym for goal planning, I suggest an additional criterion in your financial goal setting – write it down.There really is something about seeing it in writing that makes it feel more official.
Example Goal
S = Specific: I want to pay off my $12,000 car loan in the next year.
M = Measurable: It’s $12,000 so that’s and extra $1,000/month that I need to save and pay toward the loan.
A = Achievable: I will reach this goal by creating a monthly budget and sticking to it. I will cut back on some optional expenses this year like canceling my gym membership, canceling cable TV, and by eating out only once a month and making food at home and taking sack lunches to work.
R = Relevant: I want to pay this off in order to stop wasting money on interest and instead use that money to save for a fun vacation to Europe in the future. I am willing to sacrifice now so I can enjoy the future more.
T = Time-based: I will complete this goal in 12 months, by saving $1,000 each month. Since I am paid twice a month, I will make a $500 payment out of each paycheck.
In Conclusion or What if I Need Help?
It is our sincerest desire to serve you and help you build a future in line with your goals. Please contact us if you would like help setting goals and developing a plan to accomplish your goals. Happy goal setting!