The Power and Importance of Written Financial Goals
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People believe that their circumstances dictate their actions. They don’t realize that they can begin to dictate their circumstances by taking a single step in the right direction.
Values-based, Specific, Measurable, Attainable, Realistic, and Time-Oriented
When I wrote this post, my natural assumption was that a majority of the population implemented SMART Goals or general goal-setting practices in some capacity. A bit of research showed that my assumptions were quite naïve.
The Shocking Statistics About Goals
In the book What They Don’t Teach You at Harvard Business School, author Mark McCormack cites interviews performed with new graduates from the Harvard MBA program in 1979 and 1989, respectively. Full disclosure: The above link is an affiliate link. I have not yet read this book in its entirety, but it is on my reading list. However, the statistics contained in the book are alarming.
In 1979, interviewers determined that:
-84% of adults had no specific goals
-13% of adults had specific goals that were not written down
-3% of adults had specific, written goals
When this cohort was interviewed again in 1989, the results showed were predictable:
-The 13% group had, on average, earned twice as much as the 84% group who had not established goals
-The 3% group who had written goals, on average, earned ten times as much as the other 97%, collectively speaking.
Impact of Goals is Not Limited to Income
While the results above should not surprise us, they left me with unanswered questions.
-In 1989, which group, on average, had the highest net worth?
-In 1989, which group had the highest percentage of written monthly budgets?
-In 1989, did the 3% cohort create and monitor written goals for other areas of their lives?
Without having access to the interviewees, we cannot ascertain the answers to these questions. However, I feel the answers are not likely in doubt.
In my own life, I have seen that greater organization and goal setting in one area can easily spread like wildfire into other life areas. When I got my act together, financially-speaking, and set written goals, I suddenly became highly aware of other areas in my life in which I needed to establish written goals and hatch plans to achieve them.
For example, as a new graduate who had just entered the workforce, I established a written budget and soon realized that I needed a similar plan to improve my physical fitness. I began running with a friend, signed-up for a half-marathon and later a marathon, and trained according to an established plan. Without realizing it, I had created a SMART Goal for my race training, even though aspects of the goal were unwritten (For shame!).
When I got my act together, financially-speaking, and set written goals, I suddenly became highly aware of other areas in my life in which I needed to establish written goals and hatch plans to achieve them.
The Power of Written Financial Goals
I strongly feel that the power of written financial goals cannot be overstated. One my favorite talk radio hosts, Dave Ramsey, often says, “If you aim at nothing, you will hit it every time.” By definition, having no established goals is aiming at nothing.
In order to adhere to the Superhero Value of Maximization, you must strive to make every single penny work hard for you, and this begins with written goals. As mentioned previously, I prefer to think of my dollars and cents as employees. If I do not direct them, they will not be maximized. Furthermore, this is the one time in which I am a huge advocate for micromanagement! You should be reviewing your finances with a fine-toothed comb on a regular basis.
When you established Values-Based, Measurable, Attainable, Realistic, and Time-Oriented Goals, you are poised for a high probability of success. Additionally, you are only one step removed from being able to share your goals with others, who in turn will be able to hold you accountable. Even the simple act of posting your written goals in a prominent place in your home, such as your refrigerator or bathroom mirror, can simultaneously serve as both a means of keeping your goals at the forefront of your mind and providing accountability.
Why Some People Continue Without Written Goals
Over the years, I have heard people share many reasons for their lack of written goals. Frankly, I am not a fan of any of them. I find it is easy to make excuses, and I hate when I catch myself doing it. Here are a few of the common reasons/excuses I often hear:
–They don’t think about goals. Why? They spend too much time on social media, TV, and other major time wasting activities.
–They don’t know how to write goals. They must learn the V-SMART Goal writing process.
–They have given up. They believe their circumstances dictate their actions. They don’t realize that they can begin to dictate their circumstances by taking a single step in the right direction.
Financial Goals for Everyone
To get started with written financial goals, I believe everyone should pause for a moment and visualize what they would like their financial landscape to look like next week, in 3-6 months, in one year, and in 3-5 years. By beginning with the end in mind, we can create goals that will serve to motivate and inspire. After jotting down some notes, you are equipped to begin writing goals in the categories below.
Note: Brief, vague examples are provided in parentheses; these examples may not fit your circumstances. They should be modified to align with your visions and expanded to meet V-SMART specifications based upon your specific circumstances.
Short-term: (reduce your weekly spending, renegotiate television/internet contracts with service provider)
Intermediate/Mid-range goals: (pay off debt, establish a 3-6 month emergency fund, save for a home down payment)
Long-term – (purchase a rental property with at least a 20% down payment, create multiple streams of passive income, reach a net worth of $1 million, retire early!)
Readers, do you maintain written financial goals? Do they follow the V-SMART recommendations? What barriers are preventing you from establishing written goals? How have written goals boosted your achievement in the past? Share one current financial goal in the comments section below!