Imagine someone beginning a major vacation by simply saying, “North, I want to head north.”  They’ll see a few sights, perhaps even find the spontaneity a little exciting at first, but at the end of the trip, they’ll probably find that they have just managed to burn some time and money.

Without clearly defined goals, investing is like going on a trip without a road map or even a destination in mind. People, including far too many investment advisors, sometimes want to skip this step or dismiss it without giving it adequate thought. When asked about her financial goals, one of our financial planning clients simply said dismissively, “More is better, right?”  After delving deeper, several financial goals were identified that were important to her. 

Identifying and quantifying life’s important financial needs and desires represent the most significant part of the financial planning process. By setting clear goals you can chart a financial course that takes you to your destinations while providing checkpoints and meters to measure your progress along the way, assuring you that you’re always heading in the right direction, taking the best route and driving the appropriate speeds. Your financial goals should dictate your investment strategies and asset allocations, and they should be the driving force behind every action taken concerning your investment portfolio. 

In this series, we’ll look at how we set specific, realistic goals and how to avoid some of the goal-setting pitfalls that can lead to confusion, poor investment decisions, and personal stress over money matters.

Take Some Time, Get Away, Focus and Be Honest when Formulating Goals

If I asked you to list all your financial goals in say, five minutes, what do you suppose that list would look like?  You might say that you want to put your kids through college. You might say that you want to retire at 65 and travel. You may list that you want to maximize your investment returns. Your hurried list of goals would probably be generic, non-specific, and incomplete, but perhaps a good place to start.

Five minutes is not enough time for a person or a couple to establish an honest and firm set of financial goals. An hour is unlikely to be enough time either, so you should not expect to pin your goals down during the first meeting with your financial advisor. I always recommend that people go into their first meeting with a financial advisor having already prepared for this. Setting short-term and especially long-term goals is a process – a physical, social, financial, emotional and spiritual process. There is not a list of 50 goals from which you should choose your favorite ten. Successful goal setting requires contemplation, discussion, negotiation and choice. It requires that serious thought be given to decisions that include all aspects of your lifestyle and includes planning for possible lifestyle changes in the future, planned or unwanted. Your financial goals, which are the vertebrae of your financial plan, need to be well thought out, comprehensive, and acutely detailed.

A quick conversation with your spouse or completion of a short questionnaire compiled by some internet investment advice guru won’t get the job done. Try to think outside the box. Focus on goals that maximize your happiness and that of the people you care about. I’m not trying to trigger a midlife crisis or convince you to become weird – necessarily. But, neither should you just be resigned to live the life that fate seems to be pushing you toward. Look, if you don’t want to be talked into buying a private island, eating granola, and throwing pots throughout your old age, I fully understand. My retirement goals are fairly ordinary too. But neither should you buy those funeral plots down the street in Kermit, Texas without first thinking through the alternatives.

Get away. Take your spouse on a day-trip and talk over the tough questions. What do you actually want to do?  What kind of lifestyle do you really want when you retire? Do you want to leave some sort of legacy to your children, your church, or your community?  The deeper you dive, the better results you’ll come up with, and the better you’ll be able to plan for those goals now. Be honest, realistic, and specific. Before you know it, you will have the road map you need to chart your financial course toward the ultimate realization of both your short-term and long-term goals. If you and your spouse have difficulty determining goals that excite both of you, some compromise may be required. If you find yourself in this situation you might even consider working with a marriage therapist. Seriously, they won’t bite, and viewed properly, it can be a fun date.

Make Your Goals Personal

It is imperative to keep in mind that these need to be your financial goals. They cannot be your mother’s goals or your financial advisor’s goals. To be willing to sacrifice to achieve them you must truly “buy in” and commit. Many people struggle to maintain their weight and often loved ones try to help.  If you join a gym and alter your diet to please a supportive or nagging loved one, you will likely quickly return to your former lifestyle. Even if you did accomplish the weight loss goal you were pushed into, you would probably go back to your old habits very quickly once the pressure or extra support is removed. I am not saying outside pressure doesn’t ever help, but in the end, sacrifice requires an inner commitment. You will be much more likely to accomplish a financial goal that you set. 

If one of my clients wanted to set aside money to donate to a wildlife charity like the WDC (Whales and Dolphin Conservation Society), I would try not to consider whether I thought that was a worthy goal. That’s not my role as an advisor! It becomes my goal to help my client contribute to this cause. It’s a worthy cause because my client feels it is. 

Everyone is different and so are their goals. It is essential to personalize your financial goals and make them your own. Doing so will bring greater resolve and achieving them most often leads to happiness. 

In my next post, I will take you through the refining process of qualifying and quantifying your financial goals.