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3 Simple Steps to Create Financial Goals

The number one reason why clients come to us is that they need help with their financial goals.  Our clients tend to be high achievers who know when to delegate parts of their life in order to maximize their situation.  That’s why when it comes to their finances, they seek guidance.  They're not quite sure what’s adequate, fulfilling, and necessary.  That’s where we come in.  Today, we’re going to give you an inside look at how we recommend creating financial goals in three simple steps.

1) Don’t Start With a Dollar Amount

Sounds silly coming from a financial planner, right?  But, trust me.  The dollars are a means to an end.  They’re likely not the result you are actually hoping to achieve.  Let’s look at an example:

“My goal is to buy a home for $350,000 by the time I’m 38.” 

This goal frames itself around a dollar amount, not the actual tangible result.  If I want to buy a $350,000 home, then any home in that price range will do.  It could be anything from a condo downtown to a 4 bedroom country home.  Instead, we would want this person to provide more specifics about the home itself.   

“My goal is to buy a home that has a high walkability score, provides bedrooms for my family and a guest, and doesn’t require any upkeep.”

HGTV does a great job of this.  They sit down with the couple and ask them what they are looking for in a home.  The couple starts to talk about what’s most important to them.  At the end of the conversation, the realtor asks what their budget is.  This is how you should operate your own financial goals.  

If you came to us and said you want a $2,000,000 investment portfolio by the time you retire, we’d start to probe.

Why is that important to you? “
“So I can withdraw 4% from it.” 
Why is that important to you?
”I’d like to take $80,000 a year from my portfolio because that’s the amount I need to live a good life” 
What about $80,000 per year makes you have a good life?
”I want to travel and see the world with my partner without worrying about the costs of it all.” 

Bingo.  That’s where we want your financial mindset to start, not end.  Maybe traveling the world actually takes withdrawing $150,000 per year, or maybe it only takes $10,000.  Whatever it is, we want to first understand the life you want to live, and then build your resources to match it.

2) Make It Reflective of You

Thank you, Captain Obvious.  Hear me out!  Just because something is obvious, doesn’t mean it’s not overlooked.  I used to have a goal that I would run once a week.  I kept failing, despite the fact that I created a S.M.A.R.T. goal.  You all remember S.M.A.R.T. right?  Specific, Measurable, Achievable, Relevant, and Time-bound.  Here was my “fool-proof” goal:

Specific:  Incorporate a morning run into my workout routine

Measurable: Once per week for 2+ miles

Achievable:  Run around the “loop” in our neighborhood; it’s 2.2 miles round trip 

Relevant: Health is a top value of mine, and this will help me keep that in focus

Time-Bound: Start this week and go until the sidewalks are packed with snow/ice (typically early December for us Minnesotans)

If the goal was S.M.A.R.T. why didn’t I ever run!?  Oh, I know...because I despise running.  I’ve run plenty of races, and have browsed dozens of running stores, but it never sparked excitement for me.  The goal was a good goal on paper, but I didn’t enjoy it.

Therefore, when creating any goal, make sure it’s something that’s reflective of you.  It’s hard to stick with things you don’t like, especially if you’ve given it your fair share of tries.  Here’s a goal most of us can relate to; cutting back on spending.  We’ve worked with so many individuals trying to reduce their spending habits.  We typically direct them to pay particular attention to one of the three biggest expenses of any budget.  Can you guess what those are?

Housing, Transportation, and Food

It’s difficult to change housing and transportation costs quickly.  That’s why we recommend starting with your financial food consumption.  For example, we have a client that loves going out to eat but doesn’t like cooking, and they’re hoping to cut back on their food spending. Their goal shouldn’t start off as trying to cook more often at home.  Remember, they don’t like it!  Instead, we suggested going to a high-quality deli or grocery that has pre-made food.  That way they’re not stuck in the kitchen, and their cost of food drops significantly since they are no longer paying restaurant prices plus the tip (which can be a 300%+ increase in costs compared to eating a meal at home!).

3) Enhance your likelihood of success

I was having a conversation with a friend recently about a 30-day yoga challenge she is doing.  Her goal is to obviously complete the challenge, but what she did was set herself up for success to make sure it gets done.  First, she prepares her coffee on a timer the night before.  Then, before she starts her yoga, she sets out her kids’ breakfasts so when they get up they won’t interrupt her practice.  Lastly, she invited me to join her as a way to keep each other accountable.  This is a great example of enhancing your likelihood of being successful.  

That’s how you achieve your goals.  You prepare yourself to reach them and find someone to hold you accountable.  Whatever financial goal you have, we recommend to:

  • Face your numeric reality 
  • List out everything: assets, liabilities, gross pay, net pay, budget, etc.
  • Review your future resources
  • Make plans for income, gifts, investments, etc. 
  • Find someone to keep you accountable
  • That’s me!

Your investment portfolio is a major contributor to your financial goals, especially your rate of return.  So let me as you this, do you know what annual investment return you need to in order to retire?  Not what people tell you that you need… but mathematically for your situation how much do you need?  It’s a bit of a trick question.  I don’t even know the answer for my situation…

However, if you’re saving an adequate amount, you likely don’t need to have a substantially high rate of return (for example, over 10%).  That means you don’t have to take on as much investment risk.  If you are not saving an adequate amount, you’d likely have to achieve a higher investment return to be successful. 

Finding a goal that’s adequate, fulfilling, and necessary can certainly take some number crunching.  It will also take reflective effort to determine what you want, what you like, and what feels purposeful.  When it comes to building financial goals, we recommend not starting with a dollar amount, make it something you enjoy, and enhancing your likelihood of success.

If this is an area in your life you want to work on, then work with us!

Schedule Here!

Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.

Natalie Slagle
Founder, Fyooz Financial
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