You’ve got to be very careful if you don’t know where you are going because you might not get there.
Famed baseball icon Yogi Berra said these words about having purpose in life. And as whimsical as his word choice may be, he does grasp a truth that my own and many others’ experience has shown to be unassailable. You can realize greater success and happiness by creating and writing down life goals.
Not Just Any Goal Will Do
Of course, writing down a few expectations for yourself and calling it a day won’t help you if those goals are not significant to you personally. Instead, you must create realistic, actionable goals that can guide you through both the short-term and the long-term.
Combining your financial goals with a strong budget can help you make the right decisions when it comes to saving, investing, and your purchases. For instance, say you’ve identified a desire to build a source of passive income to help you retire. You may realize that buying the wave runner you wanted to buy for so long would deplete resources you have to invest. (Perhaps down the line you can reevaluate and consider that wave runner again.)
How to Create Useful Goals
I personally believe in applying the SMART goal system to planning and managing your finances. This time-tested technique can be used to ensure the goals you create are relevant to your desires and constraints. In turn, you’ll be more likely to work toward achieving these goals.
- Specific: Don’t be afraid to delve into each of the six W’s: Who, What, Where, When, Which, and Why. Who will you need to seek for your goal, or to where should you seek out resources?
- Measureable: For some goals, you will want to establish specific numbers, in particular as it relates to financial and investment matters. For other goals, you can still identify signals that you’ve succeeded. For instance, the goal “be happy” may be too ambiguous. What about something more specific like “enjoy going to work.”
- Attainable: Make sure the goals you set are important to you and that they’re important to your achievement of balance and happiness in life. Don’t just listen to others’ ideas of what is important in life. Consider your own circumstance and desires.
- Realistic: Take a hard look at your resources, time, and abilities, and set goals that you personally believe are realistic. Dream big, but think about what you can achieve one step at a time.
- Timely: Creating a timeline for your goal is a powerful motivational tool. You’ll feel a sense of urgency that you wouldn’t otherwise. Plus, setting deadlines often forces you to consider just how realistic and relevant your goals are. We all have pie-in-the-sky dreams, but you may not be able to achieve them all at once.
Tie Your Financial and Lifestyle Goals
Also, set goals for yourself that go beyond career and financial, and including your health, wellness, family, and even recreation (“Bungee jump off Victoria Falls before I turn 40”).
When I began real estate investing, I started with a goal of “make money buying houses.” While that’s a better goal than “make more money,” it lacks any parameters or even relevance to me. And what would constitute failure or success?
So with the help of my mentors, I bunkered down and realized a better goal for myself was to locate, purchase, and achieve positive cash flow from one house within a year. Since then, I’ve moved onto bigger and even more specific goals based on my income, assets, and priorities, tweaking them year-by-year.
Make it a Habit to Review, Renew, and Revise Your Goals
I recommend reviewing your goals at least once a year. Each time, ask yourself:
- Are you in a better financial situation today than you were one year ago?
- If the answer is yes, is your position substantially improved over the previous year?
- Do you feel like you’re moving in the right direction and towards achieving your personal financial goals?
Making the time for this exercise can help you make wiser decisions in all aspects of your life. When you understand the big picture better, the little things you do will help you get there all the better.