Two Important Steps when Setting Goals
In October we looked at three challenges that prevent people from getting the most from their money. Not having a clear WHY to save and invest for the future was one. Without motivation, it’s nearly impossible to put off the temptation to spend and to put in the time to learn. As a result, some personal finance books and articles focus on first setting goals to provide the WHY to continue learning.
‘What do you want for your life?’
A great example of setting your WHY is Moolala: Why Smart People Do Dumb Things with Their Money by Bruce Sellery. Bruce recommends creating ‘Moolala Goals’ that answer the question, ‘What do you want for your life?’ An example he gave was his goal to transition from a job at Procter & Gamble to become a TV news reporter. Through having a set of goals, you’ll have the motivation required to learn more about money topics and to save.
Setting and progressing towards goals
As I thought through setting my own goals, I talked with my partner, family and a few close friends about what I want out of life and how to get there. Through that process, two important ideas surfaced for setting goals and deciding how to spend my time and money. From what I can see, it’s a combination of self-reflection and intentional actions.
Self-reflection
This is about identifying who you are and what you want out of a given situation—be it your job, relationship or life.
Ask yourself, what do I enjoy doing, what do I want to avoid, what’s working for me and what’s not.
Look through what you want to achieve and decide how important each area is.
There are plenty of goals you could set. This first step is about deciding what’s most likely to fulfill you.
For example: You may enjoy exploring new places and experiencing new cultures. You might also want a steady 9 to 5 job that provides security and structure to your day. It could also be important that you experience this before you retire.
Intentional actions
After thinking through what you’d like to change, it’s time to think through what it would take to achieve.
Being intentional is about understanding the trade-offs of the actions you’re taking and how they progress towards your goals.
It’s important to remain focused on the target and to give yourself enough time to provide a chance of success.
For example: In the above case, you may create a list of your top 20 destinations and a budget to allow you to travel twice a year. If a structured job wasn’t important, you could try to find a career that would allow you to travel. And if you were okay waiting to do some travelling until retirement, you could increase your retirement savings.
Through self-reflection, you’ll find what’s most likely to fulfill you. You can then decide on the intentional actions that are most likely to get you there.
Revisiting your goals throughout your life
Once you have a set of goals, it’s important to repeat the process regularly to bring in new learnings and to evaluate your progress. You may find you don’t enjoy working on your own as much as you thought you would or that yoga isn’t bringing you the peace of mind expected. Revisiting your goals is a delicate balance between giving yourself enough time and avoiding futile pursuits. You’ll want enough time for a shot at success and to learn as much as you can from any challenges you face. At the same time, you don’t want to stick to a goal if it’s unlikely to provide what you’re looking for.
It’s only once you know where you’re heading that you ask yourself how money plays a role. Perhaps you’ll need to save up 6 months' expenses to cover a career transition, or maybe you’re ready to work towards a down payment on a house in an ideal town. Through setting goals, you’ve given yourself the WHY needed to take the next steps towards a fulfilling life.