Sunday, 20 January 2013

Financial goal setting

The keys to success in achieving what you want out of life are understanding what you truly desire in the first place and then setting specific goals to deliver this – and writing them down.

There’s an often cited study involving three groups of Harvard graduates several years ago.  Those who wrote down their goals were the most successful at reaching them.  Those who mentally noted their goals were moderately successful.  And those who did neither were the least successful.

I’ve found this to be true personally.  The last time I wrote down my financial goals was a few years ago when I did a graduate diploma in financial planning.  I put them at the front of the spreadsheet I used to track my spending, so that I’d see them weekly.  Sure enough, I tracked my progress against them religiously, and achieved most of them – although luckily not some of the longer-term ones like retirement!

The good thing is that you don’t have to be Harvard graduate to write down your goals.

A good process to go through involves:
  • Setting a draft set of goals
  • Validating and prioritising these against your values
  • If you have a combined budget with your family or partner, consolidating your goals into a single list and action plan
  • Developing an action plan to achieve each goal
  • Ensuring you have the cash flow to achieve the goals (this is where reality tends to set in … and prioritisation becomes important)
  • Putting in place processes to regularly track your progress against achieving your goals and to review and update them as required
I’ve provided more detail on each of these steps below.