The Importance of Setting Financial Goals
August 9th, 2017 | 2 min. read
The path toward financial success doesn’t begin with a hot stock tip or lucky lotto numbers. Rather, to become financially secure you should spend time setting financial goals.
Academic research indicates that setting goals provides two big advantages: it increases motivation and increases achievement.
Think about President John F. Kennedy, who on May 25, 1961, announced an ambitious goal for America: to put a man on the moon by the end of the decade. Kennedy’s goal ignited the imaginations of people across the country. But, more importantly, it motivated a select group of aviators and engineers at what would become NASA. Although Kennedy would not live to see it, his goal was accomplished when Neil Armstrong stepped onto the moon’s surface on July 20, 1969.
Setting financial goals is a small step that can create a giant leap for your financial well-being. While most of us likely share some common financial goals – retirement, owning a home, etc. – the goals that make a real difference in our lives are personal. They are the one that allows us to lead the kind of life we want.
For example, do you want to build a recording studio and make music in your home? How about opening a pastry shop downtown? Or, is hopping from island to island on a sailboat in the Caribbean more of your thing?
Questions for Setting Financial Goals
To determine what financial goals are most important to you, it helps to think beyond just what you want to do in future. The goal is to pinpoint what will make you happy.
As an aid for setting financial goals, here are 12 personal questions to ask yourself:
- What was the happiest moment of your life? The saddest?
- Who has been the biggest influence on your life? What lessons did that person teach you?
- What are the most important lessons you’ve learned in life?
- What are you proudest of?
- If you could hold on to one memory from your life forever, what would that be?
- How has your life been different than what you’d imagined?
- How would you like to be remembered?
- Do you have any regrets?
- What does your future hold?
- What did you think you were going to be when you grew up?
- What did you want to be when you grew up?
- If you could do anything now, what would you do? Why?
Your answers to these questions will help you visualize your ideal future. Then it becomes easier to determine what specific financial steps to take to achieve them.
Reaching Your Financial Goals
Once you’re finished setting financial goals, how do you reach them? The answer is simple: you need a plan.
Creating a financial plan and sticking to it is where most people struggle. And, the bigger the goal often means the more complicated the plan and the longer time it takes achieve it, leaving plenty of opportunity to get off track.
Therefore, in many respects having a clear financial plan you can follow is equally as important as having goals.
Want to own a home? Then maybe you need a $20,000 down payment. To save enough, you decide to automatically deduct $1,000 from your paycheck every month into a savings account for the next 20 months. That’s a simple financial plan that helps you achieve one of your financial goals.
For most things in our financial lives, however, it’s not nearly as simple. Retirement, for example, takes much more planning. That’s where a financial adviser can help. An adviser can work with you to create a financial plan specifically for your personal financial goals, and help keep you on track along the way.
You may find some of your financial goals appear unrealistic, like a moonshot. But, a plan and the help of a trusted financial adviser can turn just about any financial goal into a reality.