If you’re in your twenties, I’m sure that you’ve heard about goal setting, which can cover an array of projects, including personal finance. But have ever set a goal to accomplish something? More importantly, do you know how to set a goal to achieve a specific mission?
In this article, you will learn how to set goals for financial success. But first, let’s go over a few ideas about the beginning stages of becoming wealthy to help you understand the importance of goal setting.
The financial success journey
Financial success is a journey—one that takes time and requires an assortment of personal attributes that are not always obvious. Focus, commitment, and patience are just a few of these prevailing characteristics that are important to the overall mission.
Granted, there are people who “get rich quickly.” This happens mainly through lottery winnings, gifts, or inheritance. Even so, the number of individuals who get wealthy through these methods is small compared to those who gradually become successful through a well-structured plan.
This means that putting a plan together to succeed financially is not only wise but also necessary. Initially, the process requires goal setting, which is nothing more complicated than writing down some financial expectations to accomplish along the way. When you establish reasonable milestones for economic success (small targets to hit along the way), the financial journey becomes less worrisome. You simply aim at each target as it comes into view. When you achieve a milestone, you advance to the next one until you reach your destination, which may take months or years depending on the complexity of the goal.
The four elements of goal setting
Despite what you’re heard about goal setting, the process is simple. You can do it on scratch paper, phone, tablet, or computer. However, it does require some thought and structure. Above all, it needs four main elements to be effective. They are listed below:
- The objective. Here, you will be focusing on a specific target that you want to achieve. Often, this will be expressed with an action phrase such as, “I want to increase my income by 50 percent.”
- The expected outcome. This is expressed with tangible evidence or results (identifiable signs that you have, in fact, accomplished the goal). Example: “Last year, I made $50,000. Now I’m earning $75,000.”
- The end date (end of the period). The precise date that you want to achieve the goal. Example: “I want to achieve this pay increase by December 31, next year.”
- The required resources. The time and effort that you’re willing to devote to achieve the goal. Example: “This pay increase will necessitate additional education (a 3-month course with a certificate) and more work experience. Furthermore, I may need to seek employment with another company that may more readily see my potential.”
To be effective, all goals need these four elements. Together, they identify the objective, establish certain expectations, create a deadline, and denote the human effort that must go into the endeavor to make it a reality.
The three goal setting intervals
Typically, goals are broken down into three manageable intervals: short-term, intermediate, and long-term.
- Short-term goals are objectives that can be achieved within one year or less.
- Intermediate goals are intentions that can be accomplished within one to five years.
- Long-term goals are bigger undertakings that require more time, periods extending more than five years.
Using some of the information that we’ve discussed so far, an actual short-term financial goal may look like the sample below:
Setting intermediate financial goals would be something similar, except the period for accomplishing them would be longer. See the sample below:
Long-term financial goals are generally more complex. They usually deal with things such as retirement, assisting parents, reassessing insurance needs, and so forth, all of which require the help of a financial professional. However, the idea is essentially the same. See the sample below:
The black and white effect of goal setting
The tables above demonstrate one approach to goal setting. You may choose to illustrate yours in a different way, perhaps using simple statements that show intent. See the following example:
As you can see, the goal setting format is not that mysterious or difficult. Any arrangement will work as long the objectives are written down. The writing-down process is the most important aspect of this whole exercise. It is often referred to as the “black and white” approach to goal setting.
In fact, some people believe that if your intentions are not written down, they cannot be classified as goals. Keeping your ideas in your mind and daydreaming about them will not produce results. However, taking the time to write them down shows purpose and determination, and this very act provides you the “will” to make them come true.
Start your goal-setting program
Starting today, get in the habit of writing down your goals. You may use any tool that makes it convenient to do so. Then revisit them often to stay focused while doing whatever is necessary to bring them to life. In time, you will experience the benefits of your efforts.
In closing, I must mention that there is another critical component to financial goal setting, and that is creating and maintaining a CASH FLOW plan or budget. This function of financial planning is a process of simply mapping out your financial activities before they occur.
To learn more about other financial matters that will make a positive difference in your life, consider reading my new book: Pennies to Power: How to Use Your 20’s to Gain Financial Independence for Life.
Thanks for reading.
What are your thoughts?
Have you experienced the effectiveness of goal setting? Can you share some ideas that may help others initiate the process for themselves?