Set Financial Goals

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The trek for families using positive net worth to enjoy life and give back to others.

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This is activity 16 of 27 in the Enrichment & Fulfillment in Prosperity Quadrant IV trek.

Your prosperity trek has a destination. By discovering your destination you lay the foundation for establishing your financial goals.

Identifying financial goals, along with knowing your risk tolerance and time horizon, will help you to determine your investment asset allocation.

Financial Planning and Goals

A key element of the prosperity trek is having a defined destination.

Having a clear goal – whether it’s climbing Mt. Everest, graduating from college, starting a company – helps to ensure that you do the things in life that matter most to you. Goals also help give you the energy and focus to achieve your prosperity trek.

Researchers have found that merely asking people about their plans affects what they do. When people are called and asked if they’re going to vote, they’re more likely to vote. If they’re asked when they plan to vote and how they plan to get there, the probability that they’ll vote is even higher. Whatever your goal is, announce it, make a specific plan, and then elaborate on it.

Financial planning and goal-setting gives you the strength and resolve to take necessary steps to control spending, set money aside within a savings program and to address debt management and investments. These initiatives call for sacrifices – and the payoff is reaching goals that are important to you – goals that will provide you with long-term happiness and fulfillment.

It all starts with determining what it is that you are trying to accomplish – whether it’s putting children through college, retiring comfortably or leaving a legacy – or some combination of the three.

Next, we’ll look at some defensive goals – goals that provide financial protection. These are tactical goals that support you on your trek.

Begin by Determining Your Goals

Yogi Berra might have been talking about financial goals when he said, “You got to be very careful if you don’t know where you’re going, because you might not get there.”

Socking away $10 each paycheck won’t cut it if you’re looking forward to traveling the world and living the high life during retirement. On the other hand, if a rustic cabin and communing with nature is more your style, saving millions simply crimps your current life style and leaves money for your heirs.

Take some time to identify what you really want in life: your own home, a comfortable retirement, college for your kids, time to volunteer or a wing at your alma mater with your name on it.

You need to have a handle on all of that before you can figure out how much you can save and the goals you can afford. Fortunately, thinking about your goals helps you stay motivated to save.

Life Planning

The process for looking at your life could be divided into five phases: exploration, vision, obstacles, knowledge and execution.

Exploration and Vision

Creating a plan for your life can begin by truthfully answering these three questions:

  • How would you live your life if you had all of the money you would ever need now and in the future?
  • Will you change your life and how will you live it if you just found out that you only have 5 to 10 years to live?
  • Assume you only have 24 hours to live. What regrets do you have, who did you not get to be?

The answers to these questions reveal what people really want out of life, but may be failing to accomplish, due to a variety of “money excuses”.

You want to craft your ideal life in as much detail as possible. The rush of vigor and vitality that surrounds this phase can literally light a torch that provides you with the energy to achieve the vision in the shortest time possible.


Money excuses can be deadly so it is important to identify and address potential roadblocks.

Knowledge and Execution

Once the ideal life vision has been created and obstacles defeated, traditional financial planning skills of asset allocation, risk management and product selection are incorporated to complete the design and implementation of your life plan. This process focuses on your true goals from the outset and sweeps away money excuses that could easily cause your well-intentioned financial plan to fail.

Discovering Your Goals

The challenge for many families and individuals is the first stage of the process, discovering their real goals and deepest-felt personal values. A classic example is the decision whether to pay off a mortgage early by increasing your mortgage payments. A strong financial argument might be made to not pay off a mortgage early, but instead continue taking the mortgage interest tax deduction while investing the money that would otherwise have gone for early repayment. On the other hand, there’s also a strong argument to reduce the term of your mortgage, resulting in significant interest expense savings.

Perhaps you strongly dislike debt and would be much happier to have an early mortgage-burning ceremony. In your case, your personal value of minimizing debt and reducing interest costs should probably take precedent, versus letting the financial strategy of tax-savings or investments drive your planning.

Finding your real goals means digging deep into yourself. “Making as much money as possible” is a nebulous goal. Making more money for what purpose? What do you want your money to do for you? What’s important to you? Perhaps increasing your free time is more valuable to you than anything you could buy. If that’s the case, that’s what should shape your financial plan, not simply making more money.

Sometimes what seems like a far-reaching dream is actually something quite achievable. To help assess values, one key question is “What would you want to have happen if you found out you only had five years to live?” Once we establish the priorities of what’s important, we can then assign specific details and quantities to the goals to be included in the financial plan.

Here are a few additional tips for discovering your “real” goals as you begin the financial planning process:

  • Ask yourself, what do I really want my money to do for me? What’s important in my life?

When you think about your life and the things that really matter, what values are most important to you?

  • Be specific. “Retirement” isn’t a goal, it’s a wish. Exactly what do you want to do in retirement? Do you want to work part time? What do you want for your lifestyle? When would you like to retire?

When it comes to finances, people will do more, and act more quickly, when they have a clear understanding of how their actions relate to their values. Values are a lot more powerful than any sense of obligation. The truth is that people will do more to protect their values than just about anything else in life. Values are not to-do lists in disguise. Once you’ve defined your top values clearly and commit them to paper, they almost never leave you.

For this step, it’s important to stay focused on values – not goals, not things, not stuff to do or buy. Values are about being; they define a way of life. Goals tend to be about doing and having. For instance, you might be tempted to list as a value “pay off all credit card debt.” But that’s not a value; it’s a goal. The underlying value in this case would probably be security or freedom – even peace of mind. Paying off credit card debt is just a way to fulfill that specific value.

Other examples of values include health, love, balance, confidence, fulfillment, making a difference, independence, happiness, adventure, family.

The clearer you are about your values, the easier it is to base your goals on them — and the more you base your goals on your values, the more likely it is that you’ll achieve them. After all, can you think of anything better or more exciting to plan your finances around than the things that really matter to you? And what could matter more than the values by which you want to live and grow?

Ideally, each of your top five values should lead you to a specific, key goal. So next to each value, list a related goal on which you want to focus your time and energy.

  • Write them down. The most successful people have written goals.

In order to achieve a goal, you must know precisely what it is you’re after. This process will help you take those vague ideas and thoughts about what you want to accomplish.

Say one of your values is “family.” You want to spend more quality time together and your goal is to buy a vacation home where you can all congregate each summer. You could write “own a vacation home” on your list, but what would that accomplish? Not much, because a general phrase like that doesn’t help you focus on what you need to do to accomplish your goal.

Instead, ask yourself specific questions like: Where do I want this vacation home to be located? How much will it cost? What steps will I have to take to make this happen? When can I take action and begin working toward my goal? How long will it take to make my vacation home dream a reality? Once you can answer these types of questions, your goal will start to feel real and exciting.

So far you’ve identified your values, connected a goal to each value, and turned your goals into specific, detailed plans of action. Now write it all down. When you write down your goals, you make them important. When you write down important goals, you make your life more purposeful.

Writing down your goals is great, but it’s not enough. You must take action, and the quicker the better. That’s because if you don’t start moving toward your goal now, you may never get moving at all.

Identify at least one step you can take within the next 48 hours. It can be anything – all that matters is that you do something to bring yourself closer to your goal. In the example of the vacation home, the action you could take now is to go online and start researching the housing market in your ideal destination.

What you do in the next 48 hours isn’t as important as just making sure you’re doing something. That’s because your action creates positive momentum that will help carry your goal through to reality.

  • Discuss them with your partner, loved ones or friends.

There’s no such thing as a self-made person – no one ever reaches an important goal without some sort of help from someone else. It’s part of being human. To whom can you turn for help in achieving your top five goals? Perhaps family members, friends, people you work or socialize with, or people with a specific area of expertise related to your goals.

But don’t stop there. Consider working with a qualified financial advisor to really get serious about achieving success. Or look into working with a money coach – someone who will hold you accountable and help you stay motivated.

Finally, if you have a partner or family, it’s important to make sure your financial plan reflects what they want, too. By discussing your values, dreams, and goals with your loved ones, you help create a future together.

When your partner and children are all working with you toward common goals, you increase the likelihood of your success that much more.

Defensive Goals

Our goals for the future should include defensive goals that help us manage some risks and protect our financial future.

Households need to manage risk in two areas – risks to income and risks to assets. Protecting your income is critical to achieving your financial goals, as is being prepared for risks to those assets such as changes in your career, health of you or a family member, and your investment portfolio.

When you add in the projections for longer life expectancy and the increasing need to self-fund retirement, it is clear that managing risk must be the foundation of any financial plan. As you come up with your personal risk management strategy, here are some areas to consider:

Premature Death

Beyond the emotional toll, the death of a wage earner can result in outstanding bills, taxes and monetary challenges for the family. Life insurance benefits fund goals such as college education or health care and retirement expenses for the surviving spouse. A type of life insurance called “permanent life insurance” or “cash value life insurance” builds cash value that can be leveraged throughout life and tapped into at a time of financial distress. The death benefit from life insurance, which is tax-free, can cover estate taxes, continue a family business, or make charitable contributions.

Illness or Injury

Illness or injury leaves you unable to work. Your ability to earn income is your biggest asset between ages 25 and 65, as it pays monthly expenses and funds your savings for the future. Disability income insurance replaces essential income if you become disabled and unable to work. An individual disability policy is best because it belongs to you, not your employer.

Unexpected Expenses

Financial surprises can add debt and divert dollars from the consistent savings that you need to meet your goals. Have an emergency fund to cover at least three months (and preferably six months) of essential expenses so your budget can handle unexpected events such as job loss, medical issues, home or auto repairs or other emergencies. Build this fund automatically through a payroll deduction and increase the savings amount to include pay raises when you receive them.

Long-Term Care

Americans have more than a 70% chance of needing some form of long-term care after age 5. A long-term care event can devastate even substantial retirement or emergency funds, so be sure to accommodate that risk within your financial plan.

Market Volatility

Participating in the stock market has both growth potential and risk, and smart investors rely on a well-diversified portfolio of investments to protect themselves.

Understanding and managing risk is the essential foundation to any effective financial plan.

As you begin to plan for the future keep these risks in mind. Your Prosperity Trek addresses these risks by taking defensive steps.

Goals for Enrichment, Fulfillment and Happiness

Now, we’ll look at goals that are meant to provide you with enrichment, fulfillment and happiness. These are strategic goals.

Maybe you’ve thought about traveling full time. Or opening a coffee shop. Or starting a nonprofit.

These undertakings can seem intimidating, but you need not make a full commitment straightaway. Instead, test the waters. Talk to people who are doing what you want to do, run the numbers to estimate costs, or try it on a limited basis (take a few long trips; work part time in a cafe; shadow a full-time volunteer at your favorite charity). This way, you’ll get a real sense of what it’ll take to pursue this ambition – and whether you’ll really like it after all.

The more you delve into your dream, the more likely you are to make a successful transition to realizing your dream.

Understanding What You Enjoy

In order to find your dream destination you need to think about the experiences that you’ve really enjoyed.


Write down seven occasions during which you felt particularly happy and engaged. Then look for patterns. Was it interaction with people that made you feel satisfied? Creating something? Taking on a challenge? Helping others? For inspiration, talk to happy retirees about what they’re doing. Or spend a few hours on your own in the library to see what subject areas you naturally gravitate toward.

Finding Balance in Life

The more well-rounded you are, the more connected you’ll be, and the happier you’ll feel.You don’t want to get so caught up in one thing that you neglect other areas or get so stressed that it feels like work. Find how you should readjust your schedule, especially as you approach retirement.


Draw a pie chart of how you currently spend your time. Consider the following categories: work, family, rest, travel, community and home maintenance. Then sketch out how you envision dividing your time among those activities – and new ones – when you retire. This will help you prioritize your passions, and help to ensure that you’ll get the chance to indulge them.

Setting New Goals: A Continuous Process

It’s important to set some objectives for yourself. What do you want to accomplish? Goals represent your hopes and dreams. They make life more fulfilling when you achieve them.

Periodically update your life plan, asking yourself:

  • Am I still happy with this?
  • Is there something else I’d like to achieve?

Keep aiming higher, and you’ll always have something to look forward to.

Goal-Setting Exercise

Get some index cards or sheets of paper and have each head of household write a goal on each index card. Try to get 6-9 goals per person.

Now share the information. Look for areas where there is overlap is within the household.

Order the goals by importance for the household. Pick the top three.

These are the goals to consider as destinations for your prosperity trek.

Your goals will evolve. But the importance of goals – to help you grow toward fulfillment and become more empowered to enjoy life and give to others – will not change. And well-chosen, long-term goals of high importance won’t tend to change too much. Those goals reflect values that stay constant.

Maximizing the Odds of Reaching Your Goals

Use a few financial-planning calculators to help define your strategy toward reaching your goals.

Good financial-planning calculators are available free at web sites such as and AARP. Fund firms such as Fidelity and Vanguard, as well as TD Ameritrade and E-Trade, have helpful tools.

Most tools will have you enter some data – how much you earn and save; the value of your financial assets, home, etc.; how long until you’ll need your money. Assuming you’re saving for retirement, you’ll also enter your age at which you plan to quit working and the percentage of annual income you think you’ll need afterward.

Calculating whether you’re on track means making assumptions about how you’ll allocate assets and the returns they’ll yield. With allocation, start by typing in your current holdings. Then play with hypothetical portfolios to see how they alter the outcome.

The main flaw with all of the calculators is that they assume that future returns will be the same as the past.

As you use the tools they may urge you to save more, delay retirement or invest in riskier assets.

Related Trek Side Trips

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Enrichment & Fulfillment in Prosperity Quadrant IV

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