Setting Financial Goals

Written by Skip Fleming.

Setting Financial Goals

When first meeting with clients, I always ask if having written goals are essential to their financial success. In 16 years of practice, I have never met anyone who has said no. However, when asked to review those written goals with me, fewer than ten of the hundreds of clients I have worked with actually have written down their goals. This used to surprise me. However, I have come to understand that although almost everyone agrees written goals are important, few have ever learned how to write useful financial goals.

Here are some steps I teach clients in helping them write their financial goals:

1. Keep the number limited to four or five. It is difficult for people to focus on more than a few goals at one time. Fewer goals will help you stay on track.

2. Make SMART goals. Goals should meet five basic criteria:

Specific – goals should identify exactly what it is you want to achieve.
Typical example - retire at 65.
Better example - retire by 30 June 2022 with sufficient money to maintain 80% of my present standard of living until I am 95. 

Measurable - In the Marine Corps we have a saying "don't expect what you can't inspect." Have a quantifiable result in mind.
Typical - Grow my investments.
Better - Achieve an average annual net return on my investments at least 3 percent more than the rate of inflation.

Actionable – Goals should start with an action verb.
Typical – have a better savings plan
Better – save 10 percent of my paycheck every payday

Realistic – Goals should cause you to stretch but not overextend.
Typical – cut my monthly spending in half
Better – rewrite our budget to reduce our discretionary spending by $600 per month

Time-bound – goals should have a specific date. Without a particular date, goals are still dreams.
Typical - pay off my mortgage quickly
Better - eliminate my mortgage by 30 June 2024

3. Write down your goals. This is vital. When you write out your goals, your subconscious takes ownership. Your brain begins to figure out how to move towards the goal.

4. Review your goals regularly. Place your goals somewhere you will see them regularly. Some clients post them on their refrigerator, on the bathroom mirror, or nightstand. I have mine on my IPad and review them every morning as part of my morning ritual.

5. Share your goals with others who can help you. Pick out 2-3 people whom you trust to help you; spouse, a close friend, or co-worker. Permit them to check in with you on your progress. Choose people who can encourage you and gently hold you accountable for your success.

All good pilots understand that having a flight plan is fundamental to the success of any flight. A good plan must start with a clear idea of where you are going and when you need to get there. The same is true of a Financial Plan. Well thought out goals are just the start.