Any Road Will Get You There – Establishing Your Goals
Money for money’s sake does not really make a lot of sense. Rather, money is a vehicle through which life may be enjoyed. That begs two questions immediately:
- What things or experiences in life do you enjoy?
- Do you have a plan in place to achieve these things or experiences?
The road to financial independence begins by establishing clear goals:
Step #1 – Establish clear goals for your personal and professional life.
Many folks will struggle with this. That’s OK. It should take you a bit of time and effort to determine your goals. Some questions that may help you figure out your goals:
- How do you most enjoy spending your time?
- Who do you most enjoy spending time with?
- Where do you most enjoy spending your time?
- What gives you a great sense of achievement or satisfaction?
- Can you describe your perfect day?
Some possible goal ideas:
- My spouse and I want to retire by age 60, move to South Carolina, be 100% debt free, and maintain our current standard of living.
- We want to pay for four years of each of our children’s education at a State university. We’re assuming that it currently costs $25,000 per year and the cost of education will rise at 6% per year.
- My spouse and I feel strongly about giving back. We’d like to establish a foundation that will provide $100,000 a year to the local homeless shelter. This support will begin by the time we turn 65 as it’s important to us to see the impact of our contributions.
Your goals need to be “SMART”:
- Specific – You need to clarify exactly what the expected outcome is.
- Measurable – There needs to be a quantifiable aspect associated with the goal.
- Attainable – The goal needs to be achievable.
- Relevant – The goal needs to be such that it is aligned with your personal values.
- Time Constrained – A time aspect must be included in the goal.
The example goals above are all written in the “SMART” format.
While many people immediately focus on investments when they look at financial planning, it is important to first establish your goals. Once the goals are in place, then you can look at how to craft a plan to achieve these goals.
ACTION ITEM – Sit down with your spouse or significant other and determine your three to five most important goals. Write them down so that you know where you want to go and that your financial plan will support them.
In the next installment of this series, we’ll focus on cash flow.