Goal Setting: Ending up where you want to go

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Written by: Joan Reid, Family & Consumer Sciences Extension Agent, Granville County, North Carolina Cooperative Extension, North Carolina State University

Do you remember the following passage from Lewis Carroll ‘s “Alice in Wonderland”?  Alice came to the fork in the road. “Which road do I take?”, she asked.  “Where do you want to go?”, responded the Cheshire cat. “I don’t know” Alice answered.  “Then,” said the cat, “it doesn’t matter”.

forkintheroad

What do you dream of having and doing? People of all ages dream about how they would like to live, what they’d like to buy and what they will do when they are retired. Smaller, near-term wants are often easier to attain, while, somehow, it seems more difficult to do the planning to reach long-term goals. If we remember that a goal is a dream with a deadline, we might be more inclined to invest the time needed to plan how we will realize at least some of those dreams.

Getting Financially Fit Is A Journey
Being financially fit is a complex process. It’s a journey that takes twists and turns. It takes constant attention to the road, making course corrections, as needed. Think of Dorothy’s goal to see the Wizard of Oz. Oz was her destination, but she didn’t take a magic carpet to immediately arrive. She was counseled to follow the yellow brick road. While following that road, she met with unexpected experiences and derailments. However, she stayed the course, learning along the way, on her journey to her final destination.

Getting Financially Fit Through Goal Setting
Goal setting helps individuals and families become financially fit. While goal setting is an easy enough process to understand, figuring out what stands in the way of getting it done might be the first step to successful goal setting. Of course, that is different for each one of us. How do these factors affect your ability to successfully set and monitor your goals? Are there other factors that get in the way?

• Long ago learned messages about money and spending.
• Your values about money.
• Lack of (or perceived) time.
• Not good with money.
• Don’t know how to set goals.
• Can’t stick to goals once they are set.
• Can’t resist the urge to spend.
• Just want to have some fun now.
• Don’t have enough extra money to make a difference.
• Can’t agree with others in the household.
• Will worry about it later.
• Stuff happens!

Once you have decided what you’d like to be able to do with your money and you are willing to work on it, you can use the goal-setting process to get there.

Luke Erickson, University of Idaho Extension educator, described the process of financial goal prioritization this way:   “Think of budgeting as building and maintaining a boat, something that keeps you afloat. Think of written, prioritized financial goals as a motor you add to your boat to provide motivation, direction, and ‘horsepower’ to get somewhere worthwhile.

Getting Started on Your Journey
How do you get started? You might start with your long-held dreams, like owning your own house, having children or starting a business. You might select goals around life events: children’s needs (education/expected marriages), your own further education, or retirement. Adding items from your “bucket list” (things you want to do before you ‘kick the bucket’) will give you plenty of ideas for possible inclusion.

It’s often easiest to categorize goals as short-term (within one year), intermediate (one to two years) or long-term (three to five years). Beyond financial goals you may include educational, social/relationship, health/physical, and recreational desires. Those goals may or may not require money to accomplish. Before continuing, you, likely, will want to prioritize your goals.

SMART Goals Prevent Derailment
Here’s where we distinguish goals from dreams. In order to keep it real, you’ll need to determine how your goals fit into your budget. If you don’t have a budget, you can use the “Your Financial Action Plan” fact sheet from University of Florida Extension. It contains a goal-setting page, also. Using the worksheets, you will need to identify your monthly income and all of your monthly expenses, organizing them into categories.

Now you are ready to plug some of your high priority goals into your budget. Writing SMART Goals will make them more attainable.

SMART Goals are:

S – Specific – You know exactly what you want
M – Measurable – What is the cost and how much will you need to save each month?
A – Actionable – What actions will you need to take to reach this goal?
R – Reachable/Realistic – Is this something you can realistically reach without getting frustrated and giving up?
T – Time – Achieve by what date?

For example, an ineffective goal:  I want to buy a house.
SMART Goal:  I want to buy a house in my current city with a mortgage of not more than $80,000 within 6 years. I will save $20,000 for a down payment and closing costs by saving at least $277 a month.

Now you can work the monthly amount required to save into your budget. Repeat the process with other goals. What if there isn’t enough money in your budget to set aside for your goals? If money is tight, you’ll need to identify spending leaks (unnecessary expenses). Rework your budget to find ways to reduce current spending to be redirected towards the goals. For example, if you buy lunch out everyday, you might want to carry your lunch most days instead. Calculate how much you will save and divert it to your goals.

How about:
•A cup of coffee purchased each morning on your way to work? Are you willing to make it at home instead?
•Fast food breakfast every morning? Breakfast at home is much cheaper.
•The candy bars/snack foods/soda you routinely purchase from a work vending machine? Can you bring snacks (healthy ones) from    home? Are you willing to drink water?
•Lottery tickets?
•Non-nutritious foods purchased at the grocery store?
•Your other impulse purchases? Beware of the effect of “chain purchases.”

One important goal is to save money from every paycheck, even if it is a small amount. The habit of regularly saving is more important and beneficial than the amount saved. You can always increase savings once the habit is started. Many successful savers follow the Pay Yourself First philosophy. They contribute to savings before paying the bills.

One barrier to saving is peer pressure from family, friends, and the media to spend. Remembering this quote, “If there is to be any peace, it will come through being, not having” (Henry Miller), can help us focus on what is important.

You’ll need to be vested in your goals to resist the enormous pressure from marketing messages to indulge in fleeting fancies. When you cave in to pressure to spend on items of lesser importance to you, you are giving up future needs to satisfy immediate wants. If you know what you want to achieve and treat financial goal savings as a fixed “expense,” you’ll be more likely to achieve success.

If you truly think you don’t have any money to save, try this exercise: Start with putting a penny the first day in a jar. Each day, double the amount so, the second day, you’ll put in the jar $.02, third day, $.04, fourth day, $.08, fifth day, $.16, etc. Now, if you keep doing that, do you know how long it will take to accumulate $1 million? Since most of us can’t put aside that much, stop when it gets too rich for you and start all over again with one penny. Now you have a nice emergency fund started. You can add that to a savings account or if you don’t have one, start a savings account.

It really is all about choices. We all have to make them and we all have to live with them. Not making a deliberate choice is a choice, too! So use focus and purpose to make yours count! Once you have converted your dreams into goals, all you need to do is follow your plan, like Dorothy following the yellow brick road to Oz, checking on your progress periodically.

Oh, by the way, it takes 28 days of saving as above to surpass $1 million. Can you find the National Financial Management Core Competencies in this blog? Leave a comment on the Core Competencies that you found.

National Financial Management Core Competencies in this blog: Spending, Saving

How to cite this article:

Reid, J. (2013, January). Goal setting: Ending up where you want to go. Dollardecisions blog.  Available at: https://dollardecisions.wordpress.com/2013/01/18/goal-setting-ending-up-where-you-want-to-go

References:

Taylor, D. (2012, March). Chain Purchasing: The Diderot Effect. Dollardecisions blog.  Available at: https://dollardecisions.wordpress.com/category/spending-2/

O’Neill, B. (2011, February). The Importance of Financial Goal Setting.  Available at: http://njaes.rutgers.edu/sshw/message/message.asp?p=Finance&m=174

Your Financial Action Plan: edis.ifas.ufl.edu/pdffiles/FY/FY37300.pdf, 10/09

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