Goal Setting

All of us have goals, some more elaborate than others--retiring at age 50, writing the great American novel, or traveling around the world. However, daydreaming about milestones you'd like to meet "someday" isn't the same as aiming for a clear-cut result at a specific time. Before you can come up with an investment strategy that will help you achieve your goals, you must figure out what those specific goals are and match up those goals with a timeline. The two key phrases here are "specific" and "timeline." For example, "I want to quit working while I'm still young" doesn't cut it. The term "young" means many different things to many different people. Also, do you want to change careers, work part-time at what you're doing now, start your own business or never be employed by anyone, even yourself, again?

An investment plan can never be right for you if you don't know what your specific goals are and when you want to reach them. Even if you wish to have zero involvement in your investment strategy and turn it all over to a financial planner of some sort, they can't possibly make the right investments for you if they don't know what you are trying to achieve. And how can they know if you don't know yourself?

You may be thinking, that's ridiculous. The financial planner is there to make money for you--what else do they need to know really, besides how much you have to play with? Actually, they need to know a lot more about you. While some generalizations do exist in the investment world, every plan has to be tailored for a person's own agenda. Otherwise, everyone would be invested in exactly the same things.

Very few people invest simply to make money. The money represents goals we want to achieve, and the money is just the means to an end. That's why it's so important to define what your goals truly are. Everybody has a different value system and what's important to you may mean little to someone else. Determining what you truly are trying to achieve also makes it much easier to actually save and invest, because you can formulate a clear-cut strategy that spells out the amounts and time frame you're working with to make your goals a reality. Here are some goal-setting suggestions:

What do you really want from your life? Envision what you would do in your life if you could. Even if these ideas seem unrealistic, don't exclude them. By understanding the goals that truly matter to you, you'll be able to stick with the investment strategy that will enable you to reach them.

Put it in writing. By writing down your goals and aspirations, you force yourself to develop them further than just a pipe-dream.

Get detail-oriented. The key with goal-setting is to be specific. Say your goal is to "eventually live in a big house on the beach". What do you mean by "big"? Five bedrooms, one acre, 6,000 square feet? Where will this beach be? In Florida, California, or in Europe? Or perhaps your goal is to "live comfortably" when you retire. Does comfort mean staying in your current home? Does it mean downsizing? Does living comfortably include the freedom to make luxury purchases and leisure activities or simply paying the bills?

Look at your timeline. Figuring out your specific goals is only half of the goal-setting process. The other half requires determining your timeline for reaching these goals. Using the above examples, what does "eventually" live in a big house on the beach mean? Is "eventually" when you retire, when your children are in college, or when you reach a certain income or career milestone? As for living comfortably "when" you retire, what do you envision as your ideal retirement age? It's nearly impossible to come up with an investment strategy that will successfully fulfill your goals if you don't have a clear line in the sand as to when you want to achieve them. More than any other factor, your age or life stage determines the amount you need to invest and the types of investments you need to make to reach your goals.

Review your plans. While we advocate setting concrete, specific goals with a timeline as the most successful path to a reaching those goals, please don't get the idea that you're locked in once you've identified your goals. It may be circumstances beyond your control, such as illness, or an unplanned change in your family circumstances, such as divorce or another child added to the family, that changes your goals. Or you may want to alter the goals you've set because you feel they no longer truly represent what you want out of your life--and maybe they never did. We don't want to get too deeply philosophical, but sometimes to figure out what your goals truly are you have to identify what you don't want.

Financial Calculators What will it take to reach your savings goal? Use this Savings Goal Calculator to help you find out. Enter in your savings plan and view graphically your financial results. Click the report button to get more information about your plan, and what you can do to make sure that it is on track.

If you feel a change in the goals you have set is necessary, don't be afraid to make it. If the goals you have set no longer inspire you, chances are good that you will not have the tenacity to stay the course with an investment plan because there's no reason for you to do so. Goal-setting is all about determining what your goals are, which includes your timeline for reaching them and setting up an investment strategy you can live with to successfully reach those goals.

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