Setting Financial Goals
Unfortunately, everybody has already heard about goals.
Why unfortunately? Because the idea of setting goals for oneself has become so mainstream and watered-down that what originally was a pretty good methodology has now become entirely too disseminated. Which means that people now pretty much discount the benefits of goal-setting altogether.
The idea of setting goals for yourself, and later achieving them, seems like a simple one. And it is simple — from the outside, looking in. But from the inside, when it's time to sit down and determine your goals and how you're going to work toward them, well, it can be pretty nebulous. How big a goal is too big? How small a goal is really too small? What if I change my mind midway toward achieving my goal? What if — heaven forbid — I fail entirely?
As with most things, applying a bit of structure to the goal-setting process can be helpful. Author Jim Cairo, in his book Motivation and Goal-Setting, created the following 8-step process as his basic structure.
|1. Examine your identity.|
|2. Define your values.|
|3. Establish goals.|
|4. Create an Action Plan.|
|5. Implement various motivations.|
|6. Establish discipline.|
|7. Maintain flexibility.|
|8. Reach an outcome.|
Great, huh? Eight whole steps. Woo-hoo. Anybody could come up with that, right? Well, perhaps. But let's look at this in a bit more detail.
- Examine your identity.
Here's the key question: Who am I? Think about how you see yourself; think about how others see you. If you're forcing yourself to act in a manner that's not in alignment with the way you perceive yourself, then you're almost doomed to failure. At least, that's the way you'll feel, because your actions will have been guided and restricted by the standards of others. Goals must give meaning to who you are.
You might wish to print out two of Mr. Cairo's questionnaires to help guide you along as you ponder this particular step: Questionnaire #1 and Questionnaire #2.
Once you've answered them, take a moment and consider: What do these items tell you about yourself? And what do they tell you about what you want, and what you need?
- Define your values.
Values are the base alloy for all your goals. In this context, values have much to do with your core beliefs and convictions. They are evidenced in how you treat others, and in what reactions you take in specific circumstances. Your values must be reflected in, and in harmony with, the goals you're stiving toward. Check the "What Do You Value?" page for more details.
- Establish goals.
Tough to get around this part. As Jim Cairo writes, we can estimate that less than 5 percent of the population have developed, or are actively working toward, clearly-defined goals. The important point here is that even the best goals are meaningless unless they're written down. They should be specific, challenging, measurable (if at all possible), and visualized.
- Create an Action Plan.
This is where you develop an answer for the "How?" of reaching your goals. Whatever time you can spend on this step will benefit you proportionately down the road. Try breaking down your goals from Step 3 into smaller sub-goals that will lead you to completion of your main goal. Write these down in detail, along with the respective activities that will allow you to reach them. Give yourself target dates for accomplishing each sub-goal and main goal. Find small, five- or ten-minute things you can do each day to bring you closer to your goals. Most importantly: Start now.
- Implement various motivations.
It's a fact of goal-setting life: At some point your plans are going to bog down. So finding recurrent motivations to propel you toward your goals is a necessity. What makes this difficult, though, is the fact that finding such motivations for personal-life goals (as opposed to business goals) can be tricky. If your goal is, say, to create a $1,000 emergency savings fund by the end of the year, then allowing yourself the award (positive motivation) of buying a new DVD player when you've saved up $500 in your e-fund is perhaps not the best idea; i.e., the cost of the DVD player might be a bit counter-productive to your overall situation. So you'll need to be creative, and careful, here. Some folks derive a lot of motivation simply by keeping themselves immersed in their subject of interest; if you're like this, you might wish to start reading stuff from our reading list. Or you might consider keeping an online goals page for tracking your progress, or perhaps an online financial journal.
- Establish discipline.
Consumer-debt statistics make it painfully obvious that personal discipline (among other things) is really lacking in our society. Still, there is no person out there who can't develop it. And it is of paramount importance here, because your goals will only be attained to the extent that you can discipline yourself to reach them. Discipline begins when you take ultimate responsibility for yourself. Focus on what needs to be done, rather than what you would like to do. And remember that most any chaotic situation can be cleaned up if you start small. Keep personal calendars and to-do lists written down. Keep charts of your progress. Refer to them often.
- Maintain flexibility.
There are two items in your personal life that you'll never be able to avoid: death, and change. Change is normal and positive; uncertainty is always lurking out there, waiting to pounce. Thus, the best plans are those which were laid out with flexibility in mind. If you're able to make yourself see change as an opportunity, a challenge, or a new problem to solve, then you're well on your way to dealing with it successfully. And remember to always harbor a healthy dose of patience — chances are, you're going to need it.
- Reach an outcome.
Your "goal" and your "outcome" may not necessarily be the same thing.
According to Mr. Cairo:
Outcomes are both similar to and different from goals. Goals are specific, defined objectives with ways to measure your progress in a given time frame. Your outcome is what actually happens, which may or may not be what you originally targeted on your success map.
Remember to take pride in your successes. Reward yourself appropriately. Learn from your failures, and improve yourself and your methods through them. But do not dwell on them. Overcome them.