Financial Decisions Made Easy with Clearly-Defined GoalsSubmitted by David Vaughan Investments, LLC on October 9th, 2017
A good example of indecision occurs in the story of “Alice in Wonderland” in which Alice comes to a fork in the road and must choose a path to continue her journey. She seeks the advice of the grinning Cheshire cat which appears out of nowhere. “Where are you headed?” the cat asks Alice, to which she replies, “I don’t know.” “Well,” the cat smugly responds, “then it really doesn’t matter.”
With no clear destination or goals, it’s impossible to make decisions with any degree of clarity and any path we choose will be paved with uncertainty. Setting well-defined financial goals based on a clear vision of what you want to achieve and a time horizon for achieving it, is essential to helping you reach your ultimate financial destination.
Equally important, goals tell you where you are. One of the reasons people falter in their financial pursuits is they can’t see their progress and they quit in discouragement or fear of failure. Goals can be broken down into checkpoints or benchmarks that enable you to see if you are on track.
Most importantly, clearly defined goals will help you clarify your choices. If a road won’t take you to your destination, you don’t take it. Your choices become clear, your decisions and actions have purpose, and your results bring more satisfaction. Goals are the pathway to your financial success, and goal setting is the crucial first step. While there is no one correct way to go about goal setting, it helps to follow some basic steps:
- Inventory your needs and wants. Write down on a sheet of paper everything you need and want to do financially. List your needs (must haves) and wants (like to have) separately.
- Determine a time horizon. Separate your priorities into short-term and long-term goals and assign a specific time frame to each. Short-term = 1 to 5 years; Intermediate-term = 5 to 10 years; Long-term = 10+ years.
- Prioritize. Go through your list and assign a numerical rating with “1” being most important. On a separate sheet, write down your top three needs, followed by your top three wants. Needs should always take precedence over wants. Reprioritize based on time horizons (i.e. important short-term goals should take priority over long-term goals).
- Determine the cost. Estimate how much it will cost if you had to pay for the goal today. You will want to calculate the monthly savings requirement for each goal.
- Establish milestones. Each goal should be broken down into smaller goals with specific milestone dates. You will find that a goal is easier to pursue when you have smaller, more frequent targets to shoot for. Achieving short-term milestones produces more motivation.
- Develop action plans. Create a separate action plan for each goal including specific steps, timing, milestones, and a tracking log. Include any steps you will need to take to educate yourself on the goal, such as a type of savings or investment program.
- Hold yourself accountable. Share your goals and action plans with your spouse, your family or a trusted friend. Ask them to check in with you periodically about your progress.
With clearly defined goals, not only will you have greater clarity in your financial decision-making, but you will also be able to develop targeted strategies and action plans to successfully reach your financial goals. DVI can assist you in working through these goal setting steps – talk with your Relationship Manager to inquire further regarding our planning tools and how we can help.
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