Yogi Berra once said “If you don’t know where you are going, you might end up somewhere else.” 1 Surprisingly more popular than my wisest fortune cookie insight “Man who go to bed with itchy bum wake up with stinky finger.”. A recent study suggested that 63% of Americans are living paycheck to paycheck. I’m pretty sure most of them didn’t set out with that as their goal, but the truth is that our financial reality is a result of the many big and small decisions (tradeoffs) we make. As Yogi shared so…eloquently, if we don’t set our own destination intentionally, we will indeed end up at a destination – but very likely not one that we would have chosen.
If you don’t know where you are going, you might end up someplace else.
Yogi Berra
To be clear, financial success goes beyond simply imagining it (if that were true, about half the country would have won the recent billion dollar Mega Millions jackpot), but knowing where you want to go is absolutely the first step in your journey toward making it a reality.
Realizing our goals will usually require us to make tradeoffs – spending less on something good to realize something better. Without some kind of vision (our personal goal) to provide motivation, many lose focus along the way and fall back into the same old habits, so it is important to take some time to reflect on what your goals are. We’ve attached a sample “goal sheet” and provided a few thoughts on coming up with good goals below:
So what makes a good goal?
- It should be personal. What gets you excited about your future? This may not be explicitly “financial,” but most life goals have financial implications.
- It should be specific. “I want to be successful” doesn’t really give you a lot to go on … “I want to retire at 60” – much more so!
- It should be measurable. A goal to have a family vacation to Disney can be quantified (if barely).
- It should be attainable. A desire to be the next Steve Jobs might be laudable but you don’t go from zero to billionaire just by writing it down 2Although past lottery winners have demonstrated that it is all too possible to go from millionaire back to zero again much more quickly!. There is nothing wrong with dreaming big, but our goals should be ones that allow us to achieve and measure progress on the journey.
- It should be time bounded. Owning a house in the next 5 years is something you can hold yourself accountable to. Without the date, tomorrow’s dreams may remain always “a day away.”
- Your goals should be of various lengths. Long term goals are great (yes, we want an adequate retirement) but what do you want along the way? Having the family goal of a trip to Disney or that vacation getaway with your spouse can help you keep the motivation and energy to follow through.
- Involve the right people. If you are married, goal setting is a family task! It is very common in a marriage for one person to be more of a saver while the other enjoys the freedom of spending money. Thinking from the perspective of your spouse is key towards a set of goals that can work for the family.
So what’s next?
It’s your turn. Take the time to reflect on where you want to be. What are the short, medium and long term goals that motivate you?
Here are just a few ideas of common goals to get you started…
- Build a $1,000 emergency fund
- Pay off consumer debt
- Take a family vacation
- Save for a down payment on a house
- Pay off school debt
- Pay off the mortgage on your house
- Help with kids education
- Retire at age ___