Planning for Your Goals

Goal planning is the real "meat" of financial planning. That is to say, once you've covered the issues we addressed in the earlier sections - organization, developing and improving your net worth, and providing for the safety issues, it is now time to consider exactly what you would like to do with your money and your life.

This is a very personal set of decisions - no one person makes the same decisions here. Perhaps you'd like to open your own business, and become your own boss. Maybe all you'd like to do is to finish working for the State of Illinois after 30 years and spend your time playing with your grandchildren. Or maybe you're finishing up college and now you're beginning to earn some money, and you're planning on buying a home.

Setting your goals is very important as you begin a savings and investing plan, because without a goal in mind, it is difficult if not impossible to "map" your way there. Of course, if all you'd like to do is save money for the fun of watching the amounts increase - that, in itself is a goal.

Assuming that you're not just saving money for the fun of it, a few guidelines are helpful in setting these goals. As you may have learned in other contexts, useful goals are SMART - Specific, Measurable, Action-Oriented, Realistic, and Time-bound. I'll explain these further as they relate to financial goals:

Specific - determine the cost of your goal. Maybe you'd like to purchase an RV and travel about the countryside. Find out what the cost of an RV is, as well as other costs associated with this goal. When do you want to do this? Be as specific as possible when describing your goal. With this information in hand, you've got an idea of how you can get there from here. Since you went through and organized your information, you know where you are now (financially), and soon we'll begin actually developing a plan to reach your goal.

Measurable - by knowing the cost of your goal, you can begin to measure your progress toward your goal year-by-year (or month-by-month, quarter-by-quarter, etc.). This is important so that you can see that you are progressing as expected, or maybe unforeseen events have slowed your progresss, so that you have to make adjustments to your plan.

Action-Oriented - by ensuring that your goal is action-oriented, you can easily visualize yourself enjoying the fruits of your labors once you've reached your goal. It is important psychologically that you have this kind of incentive. Visualization is a very powerful tool which helps us to achieve our goals.

Realistic - if a goal is unattainable, it doesn't do anyone any good. That doesn't mean that we should only pursue the easy things, because "stretch goals" are an important way to push ourselves beyond our comfort zone to achieve things we didn't think we could. Make sure that your goal pushes you to new heights, while at the same time maintaining a reasonable expectation.

Time-bound - as mentioned in the "Specific" section above, you should put a timeline on your goals. Set the date to achieve your goal in a "Realistic" fashion, which will then make it "Measureable", as well.

Now - begin developing your dreams and goals. Brainstorm, think of your heart's dreams, and reach for the stars. In the next posting, I'll begin discussing how to lay out plans to achieve these goals. Until then, have some fun developing goals -

-til then,
jb