David Blain, CFA is CEO and Founder of BlueSky Wealth Advisors, and author of "Invest in Your Life, Not Just your Portfolio."
Have you ever jumped off the sofa declaring “I need a vacation” and then sped off in your car toward the airport?
Of course not! You planned. After everyone agreed on where to go, you checked calendars, chose dates, and reserved flights, hotels, and various activities. Then you waited weeks or months for the special date. In the meantime, you squared everything away at work so nothing would interrupt your big trip.
Why not approach your finances with the same forethought, dedication, and patience you planned your trip to the Caribbean? Or Europe? Or Disney World?
3 Easy Steps for Setting Goals
As with anything, the steps are easy, but the doing and discipline take energy. Occasionally, somebody stumbles into success, but that’s rare. Most prosperous people set goals and know their target. Once you’ve set a goal, you very well may exceed it. But you can’t expect to hit a bull’s eye on a target that you haven’t even defined.
My new book Invest in Your Life, Not Just in Your Portfolio outlines these critical three steps for goal setting:
- Determine what you value or need. What do you want most? Whether it’s philanthropy, retirement, travel, a vacation home, kids’ or grandkids’ college funds, or a combination of these, decide what’s important to YOU. Think of them as your target or destination.
- Set specific short-term goals with dates. Next, identify the specific goals it will take to reach your destination and assign a date to each of them.
- Calculate the cost needed to achieve those goals. Also critical to reaching your goals is knowing how much it will cost to get there. You won’t reach even one goal if you fail to assess its cost and the time it will take you to achieve it.
“I’d like to go to the moon one day” isn’t a goal. But this is: “By the time I’m 65, SpaceX will be taking people to the moon for around $1 million. I’ll start saving X dollars a month now so I can be one of those travelers.” That’s a “when-where-how” goal you can meet!
Living Your Values
Achieving your goals takes sacrifice, discipline, and careful planning. The uncomfortable truth is financial freedom depends on your ability to both save and conserve consumption. My clients who retire early do so because they’ve made careful decisions along the way about how they live. For example, they might drive 10-year-old cars instead of buying the latest and greatest vehicle every year or two.
While serving in Iraq during Gulf War I, my fellow soldiers and I had no doubt why we were there—that is, it was our job to get Saddam Hussein out of Kuwait and guard against other aggressions he might undertake in the region. Having that clear confidence in our mission helped us make sense of our day-to-day work.
It can be the same with your financial goals. Knowing your mission or target will make your day-to-day decisions—even the hardest ones—easier to make. Follow this three-step process to achieve what you value most so you will arrive at the destination you want.