When discussing someone’s financial goals I’m often asked, “is that a good goal”? I really think what they’re asking me is whether I think their goal is realistic. Not just whether their on track but whether or not their goal is attainable and worthy of effort and sacrifice.
A big believer in specific goal setting, I think it is important to have financial goals that present certain characteristics:
1. You have to really want it. Not just think you want it, but be passionate and competitive about it.
2. You have to believe that you can do it. You may want to start your own consulting business, but if you don’t think you can do it, then don’t include it as a goal. Maybe instead, set a goal of getting a job at a prestigious consulting firm.
3. You have to be able to picture the result of achieving your goal as having a lasting positive impact in your life. If buying a second home means you’d feel more misery taking care of it and worrying about it, then don’t set this as a goal.
4. You have to be able to build steps and achieve benchmarks along the way. You are less likely to achieve the goal of buying a house if your goal is to buy a house. Instead, set a series of goals related to buying a house like:
a. Place $500 per month in a money market account until we have $20,000 saved toward a down payment.
b. Have cars paid off in 30 months by adding $50 per month to our principal payment.
c. Accept the cash bonus from work instead of the sales-incentive trip to Aruba and save the cash in the money market account for a down payment.
If you have a financial goal that has these characteristics, now you can focus on building the “how-to” steps necessary to get there.