Goal Setting: "Failure to plan is a plan for failure"
Unfortunately, we live in a world of limited resources and are not able to do/have everything we would like now. One of the easiest traps to fall into is to take a short term focus and direct our efforts to the things that seem easiest and fastest to achieve. The issue with this is that you may be devoting your time and resources to something that is less important to you which leads to delaying you from realising those goals that were actually more important and would have had the most profound impact on your life.
The first step in the financial planning process is documenting your goals and determining their relative priorities. This way we can develop a plan to achieve what is actually most important to you. When I meet with a client it’s the financial questions like; how much do you owe on your mortgage? what is your gross salary? That are pretty easily answered by most. However, in my experience the most important question “What are you working towards?” is the hardest for anyone to answer. Why this is that case is pretty simple, your day to day life is focused on the immediate term; paying the bills, getting the kids to school on time, buying the groceries for dinner and very few people sit down on a regular basis to define goals.
Everyone has a vague sense of what they would like to achieve and as part of the process we take we will work with you to explicitly determine these goals. To look at the goal setting process lets start with a pretty basic goal “I want to be able to retire comfortably”. This is a goal shared by pretty much everyone and one I hear a lot. The issue with the goals as it has been expressed is it is vague. Properly expressed this goal may look like:
“I wish to retire at 60 years of age on my current cost of living of $70,000 pa (indexed). I would like to be able to self fund my retirement which based on my life expectancy at that point of 22 years I would require $893,820 (in todays dollars). Given my current net financial investment position (Assets less debt excluding my home) is $400,000 and ten years until I retire I need to grow my wealth by $69,421 p.a. to achieve this.”
The difference in the two statements is the latter is Specific, it states exactly what retiring comfortably entails; it is measurable, it states the required assets to achieve this goal and gives us something from which we can measure progress; and it is time bound, they have ten years to achieve it.
The hardest part of goal setting is ensuring your goals are achievable, if you are overly ambitious and will never be able to achieve the goals the likelihood of giving up is far greater. Once you have clearly defined your goals and determined what is required to achieve them you may find that you will not be able to do them all as you have described them, as such you need to determine their priority. You may need to modify the lower priority goals (delay/reduce the associated cost) or even choose to abandon them.
This isn’t an easy process and at Hart Wealth Management we will work with you to define your goals so that we can construct a plan and give you the direction to help you achieve what is most important to you.