Writing Your Own Financial Plan, Part 2 — Goal Setting

Writing Your Own Financial Plan, Part 2 — Goal Setting

The second part of this three part series, is around the topic of: GOALS.

For some people this gets you really excited, and the prospect of writing goals, and thinking about the future and setting goals is a motivating and energizing experience. That’s wonderful, run with it and use this skill for setting goals to better your financial life. For many, however, the idea of goal setting is daunting or just plain dull. For some the very word “goal” causes you to feel anxious or maybe you just don’t believe in goal setting and it’s hard to think with any real clarity about the future. For these people, I encourage you to try using words like priorities, or targets, or objectives, or even ‘educated guesses’ to lighten the burden you feel when it comes to setting goals. Remember that you can always change, modify, remove, and update goals. Most likely things will change, we don’t know what’s going to happen tomorrow let alone 10 years from now. So let that give you some freedom to put things in writing, knowing that you can always edit them later.

The whole idea around the “goals” part of your financial plan is to target a few of the most important desires you have for your life over the next set of years. I’m purposely vague on the amount of goals and the time frame of your goals because that’s the beauty of a personal financial plan, it’s unique to you. In part 1 of this ‘write your financial plan’ series, you already wrote down Your Highest Values and Your Purpose, which will allow you to check your goals against these values to make sure they align with what’s most important to you.

Another way of thinking about your goals or best guesses is to think about the “big rocks” you need to get into your jar first. We’ve all heard or seen the visual experiment around prioritization which uses big rocks, small rocks, pebbles, sand, and a jar. The goal is to get it all inside the jar, and if you don’t start with the big rocks you’ll never fit it all in. The rest of the stuff just kind of fits in around the sides and on top, as long as you get the big rocks in first. So when it comes financial planning, what are the big rocks in your life that you need to have your money go towards first, each month, or each year?

Ron Blue, a personal finance author and someone I hold in high regard, talks about six categories of long term goals to choose from. These categories might give you some more ideas on where to start when it comes to putting some financial life priorities in writing. The six long term goal categories with which you can begin to prioritize your money for, are:

  • Financial Independence

  • Family Needs

  • Lifestyle Desires

  • Being Debt Free

  • Starting a Business

  • and, Charitable Giving

Within each category there are numerous specific goals that you may come up with, but these will at least get the ball rolling.

Some people like the idea of categorizing your main objectives around time. Having short-term, medium-term, and long-term goal categories might help you think about what’s important. Short-term goals may be 1-2 year goals, medium-term goals might be 3-5 year goals, and long-term may be 5-10+ year goals. When you think in terms of what age you’ll be at that time, and try to imagine yourself at that age and what you’d like to have happen, that also helps you visualize and put in writing financial goals.

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