The Financial Goal Setting Trap

Is financial goal setting really that difficult? Well “If you don’t know where you are going, any road will get you there” to quote baseball great, Yogi Berra, says more about the problem with goal setting than most books on the subject.

In his quote, Yogi reveals the financial goal setting trap which many people fall into and the reason why they fail to get to where they want to go.

The problem is not that people fail to set goals. The fact is that most people do set goals.

We are all taught to do that early on from our parents, coaches, teachers.

The real problem is that, most of the time the goals are not clearly defined or they are not ambitious enough.

When goals are ambiguous or too easily attainable, they won’t spark the motivation that will truly drive a person to take action.

The same can be said for goals that are too ambitious, beyond the reach of a person’s capacity to achieve them.

In both cases, the goals may lack any true meaning and plans developed around them will not be taken seriously.

A financial goal needs to be clear and important enough to inspire a person to create a plan follow the road, and overcome obstacles.

To do that, a goal needs to be based on a vision one has of what achieving the goal will do for them and how it will make them feel.

Simply setting target dates and dollar amounts carries no emotional weight, but a goal that can be put into pictures that produce a feeling of well being becomes the emotional impetus to take action.

How to Avoid the Financial Goal Setting Trap

Visualize and Verbalize Your Goal

If you can’t visualize or describe it to someone, it is probably not a true goal or at least one that will motivate you to action.

We all want to retire, but do we know what retirement will look or feel like?

How will we use our retirement time to pursue our passions, hobbies?

How important is it to be able to do it? The more these questions can be asked and answered, the more vivid the image of retirement becomes.

Goals that are visualized and verbalized, often, become more real and meaningful.

Set a Reach Goal and a Safe Goal

A reach goal supports your vision, but it may be just beyond your current capacity to achieve it.

Your primary obstacle may be current earning and savings capacity, but the goal is important enough for you to work to overcome the obstacle.

A safe goal also supports your vision, but it may be a scaled downed version, or set with a longer timeline to achieve it.

It’s a doable goal based on your current situation. As your situation improves and your savings capacity increases, you can ratchet up your safe goal.

Measure Your Progress

People lose interest in their goals when they can’t measure their progress towards achieving them.

Meaningful financial goal setting can inspire meaningful plans which provide action steps that can be followed.

Your plan should include benchmarks or milestones that will indicate whether or not you are on the right road to your destination.

Financial Snapshot Case Study
Financial Goal Setting

Louise (Not her real name) had always wanted to move to France to purchase a small farm.

Her dream was to have a workshop and spend time doing pottery and hopefully sell it to local stores.

As a child it was something she loved to do and now today as a real estate agent she planned her escape to the countryside just outside of Bordeaux.

She had some friends from her university days who lived in the area so there was a basis for a social network

Having gone through the boom and bust of the real estate market over the years, Louise had built up a reputation of being a great agent who did wonders for her clients.

But now at age 45 she started to reflect on what she had accomplished and what her vision was for the future in France.

Louise owned her own home with a mortgage of less than 5 years left to pay. Her RRSPs was a sizeable amount, but due to being self-employed and a fluctuating income she could only maximize based on her previous year's earned income.

But one thing she did do was to build up six figure long-term non-registered savings, along with owning a mortgage free rental property she inherited.

What always had Louise in a state of uncertainty was would her goal be attainable and what steps should she take to know if it made sense?

So what she did was spend time on the Internet, researching the cost of farms in the area she wanted to live in.

She did research on the cost of living and all the essentials she would need.

But the biggest research endeavor was to find and rent a farm for two weeks in the summer and then another two weeks in the winter.

This way she thought she would get a feel of her potential lifestyle in different times of the year.

That was two years ago since the visits, it was an eye opener. While she enjoyed the adventure, it was not quite what she expected.

Her goal is to still move there but later on in her retirement.

Louise figures she still has other places in the world she wants to visit.

And that is beauty of financial goal setting, not only are they unique to you but you can make them as elaborate or simple as you want.


More Information and
Tips on Financial Goal Setting

What You Need To Know About the Goals of Financial Management

3 Tips for Setting Short Term Financial Goals

5 Simple Strategies to Achieve Financial Goals

5 Simple Truths That Make a Difference in Reaching Financial Goals


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