“If you don’t know where you are going, you will probably end up somewhere else.”
-Lawrence J. Peter
When I was younger, I dismissed the importance of goals. Goal setting seemed like a great academic exercise, one you performed with pen and paper but which didn’t matter much in the “real” world. I’ve since seen the light and have realized that goals are not only important, they’re easily the most powerful driving force for success.
Goals create the focus and vision we need to get the most out of life. They’re the difference between wandering lost, aimlessly in the wilderness, or driving straight toward your dreams with the red hot intensity of a heat seeking missile.
Let me break it down.
Have you ever walked somewhere looking straight down at your feet as you take step after step. Probably not because you’d quickly stray from your desired destination. Try it sometime in the safety of a playground or your own back yard. You’ll be amazed at how quickly you’ll veer off course.
To walk straight you need a reference point. You need a fixed point in the distance. That’s why we walk with our heads up.
And that’s exactly what goals provide. They provide a fixed point on the horizon that keeps us from wandering off course. Working without goals is like walking with your head down. You’ll never end up where you want to be.
Solid, definable goals are the keys to financial freedom. There’s no way around it.
Perhaps that’s why best-selling author Dr. Thomas Stanley, in his book The Millionaire Next Door, discusses the importance of goals in achieving financial success.
According to his extensive survey of American millionaires, the vast majority of millionaires set financial goals, helping to explain why these people became millionaires in the first place!
“How am I going to live today in order to create the tomorrow I’m committed to?” – Anthony Robbins
By providing long term benchmarks, goals help shape our daily decisions in a way that encourages positive financial outcomes. And like a map, goals keep us from going down financial dead end streets.
When we see, for example, that spending $159 on a pair of designer shoes will take us further from our goal of a down payment for a home, we tend to put the shoes back on the shelf.
So how do we set the right goals? How do we create goals that lead to financial independence?
We do it the SMART way. Our goals have to be:
Specific Measurable Authentic Realistic Time limited
Specific
Vague goals lack power. Yes, they sound nice but they do nothing. To have power your goals must be specific. It’s not enough to say, “My goal is to buy a new house.” Try this instead:
“My goal is to purchase a home located in a good school district within 30 miles of my job at a price between $300,000 to $350,000. I will save $45,000 for a down payment and purchase my home within 3 years.”
Now that’s specific. It offers a clear blueprint for success.
Resist, “My goal is to get my financial life in order.” Instead try:
“By the end of this year I will have created a budget that I consistently follow, eliminate my $7,322 credit card debt, and save $2,000 in a savings account.”
It’s the detail that gives your goal life, meaning, and power.
Measurable
In order to ensure you’re moving closer to your goal, you must have some way to measure your progress. You need mile markers on your road to success.
Are you doing OK, or do you need to kick it into high gear?
Let’s say your goal is to save $45,000 for a down payment to purchase a home in 3 years. Simply measure your progress by reviewing how much you’re putting away each month.
Are you saving the $1250 every month you’re going to need to reach your goal? If not, you may have to eat at home more, go to fewer movies, or ditch that expensive club membership.
Measurable goals allow you to track your progress and adjust your efforts when needed.
Authentic
There are going to be rough times. There will be moments when you’ll want to give up, quit, and abandon your goals. This is exactly why your goals need to be authentic.
An authentic goal is one that aligns with your values. It’s a goal that has meaning and will significantly change your life. It’s this authenticity that will allow you to motor through even in the toughest of times.
Let’s say you value your child’s education and want her to attend a great school that prepares her for college. The goal of saving for a new home located in a great school system suddenly has authenticity based on the value you placed on education.
When times get tough or when you need to make tremendous sacrifices, the thought of your daughter getting a great education will help you continue to strive toward your goal of a new home.
See how different this is from the less than authentic goal of wanting to save for a new larger home, one that impresses your friends and signals that you have “arrived.”
When times get challenging, the idea of a larger home to impress your friends and family may not carry you through or force you to make the necessary sacrifices.
Creating authentic goals requires you to carefully examine the motives behind them. Are the goals really going to improve your life and make the lives of your loved ones better, or are they means to an even larger status symbol?
Realistic
If your goal is to be a millionaire by the end of the year but you only make $50,000 annually, you may be a little bit unrealistic in your goal setting.
This is where it gets tricky. Your goal must be realistic, but it should also challenge you and cause you to break out of your comfort zone. Your goals should push you to the limit.
When I was running track in high school, I was continually challenged by my coaches to improve my time in the 200 meter dash. No, the coaches didn’t expect me to run an Olympic time which would have been totally unrealistic, but I was challenged to go for the school record. This would cause me to reach beyond my comfort zone, and it worked!
The take home lesson: Your goal cannot be totally out of the realm of possibility, but it should be extremely ambitious. THINK BIG.
So while it might not be realistic for someone earning $50,000 to make one million dollars at the end of a year, why not set the goal of making $200,000 by the end of the year, or how about accumulating 1 million by the end of 3 years? These are goals that might stretch someone to their limit but which are completely achievable. (And of course there should be an authentic reason why you’d want to do so).
Time Limited
“Goals are dreams with deadlines.” – Diana Scharf Hunt
Without a deadline, a goal is simply a dream or vague desire. It remains something you’d “like” to achieve. Without a time frame, your goal will be accomplished “someday,” but we all know that “someday” will never arrive.
A deadline forces you to take action. It provides you with a sense of urgency. Only by putting a deadline on your goals will you see them come true.
BMWK, Are you ready to change your financial situation? What are your S.M.A.R.T. goals for 2015?