I am going to share some of my best advice to help you become financially literate and live the life you want for yourself and your family every Monday in April to celebrate Financial Literacy Awareness Month. Today, I am going to share the most important piece of the puzzle when putting together your financial life—your goals.
A few weeks ago, I had a call from a prospective client. She was successful executive at a large company who was looking for some guidance. After some initial pleasantries, she jumped right to the focus of her call.
“I need you to help me pick my investments.”
“Whoa,” I said. “Investments are the easy part. But before we even start looking at investments, we need to figure out what your goals are first.”
There was a long pause, then almost a sigh of relief. “Really? Goals first, then investments?”
“You got it.”
This is a familiar scenario for me. Most people naturally jump to investments with little consideration of their goals. You need to know what you want for yourself financially before you start considering which investments will help you achieve your goals.
I have long believed that we are the culmination of the many decisions we make daily. I find this true with all aspects of our life. If we make more good decisions (ones that take us towards our goals) versus bad decisions (ones that take us further from our goals), then we move closer to realizing our desires.
After 23 years of working with individuals, small businesses and families, I know that goals for retirement, education of children, new homes and travel can take years to achieve. So if you do not know what your want for yourself, then how can you make good financial choices towards the achievement of your goals? You can’t.
This is why your goals matter. They act as your best defense against mindless spending. People who are in debt are not bad people. They are people who made some bad decisions, often times without even realizing it. Many times we think we are making smart financial decisions, but without goals to act as a filter, more often than not, our spending decisions are guided by our emotions and may not be in our best interests.
It’s why one of the first lessons I taught my girls was to give their money purpose through setting goals. The second lesson was how to use those goals to compare against other things they find and want by asking themselves, “Will this bring me closer or further away from achieving my goals?”
It’s a question they have heard me ask myself as well. We always find things we like and want and without having something to compare against them, it’s very easy to say “yes” to everything we want. By seeing me choose to honor my goals instead of satisfying a desire, it’s now easier for them to honor their goals as well.
I love to set goals, but I realize it can be a struggle for some people. They are unsure of what they want, so they fall back onto what everyone else seems to want. This is a mistake. What someone else wants isn’t necessarily what you want. You shouldn’t set goals to impress me or others. Your goals should be something you are highly motivated to achieve and make your heart happy. You want to be confident that when given a choice between achieving a goal or something else, you will choose your goal.
As you create your authentic goals, two things to keep in mind:
Some people believe they are stuck with the goals they set for the rest of their life. While you certainly don’t want to change your goals every other day, they are not etched in stone either. Our lives change and the things that we want change too. What matters is you set the goals that you want to achieve right now, so they can guide your money decisions.
Goals need to be reviewed regularly. Not only to to chart your progression but also to give you a chance to refine or change goals. Too many people create their goals, then tuck them away and forget about them. Don’t do that. Review them monthly or quarterly and make adjustments as needed. Share your goals with others, especially your kids. Put them on post-it notes and hang them in your office, so your goals stay front and center.
Just as we understand what we need to do to be healthy and fit (eat right and exercise), we also know the basic tenets of how to be financially healthy (spend less than we make and save) but examining our obesity and debt statistics prove – knowing is easy but doing can be hard. This is why goals are so important. They form the foundation of your financial lives. The strength of your goals—your commitment to achieving them—play a key role in building the life you want.
We are in the process of buying a new home right now. We have a budget that will allow us to still save towards our retirement, the girls’ education and do the travel we love. But is it hard, even as a financial advisor, when the house you love is over your budget. It’s hard to stand back, and not get caught up in the bidding war and exceed our budget so we can live in our dream home. But we have other goals that are more important to us. Because we know what they are, and how much we have to save towards these goal each year, it helps to take out the emotion that many get caught up in with big purchases. We may have not been able to buy our “dream” home but truth be told, it wouldn’t be much of a dream home if it meant sacrificing all of our other dreams and goals either. Financial literacy starts with knowing what you truly want.
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