You’ve gotta have a goal.
Is your goal to retire comfortably at age 55? A new home or car? A big college fund for the kids? Each of your financial goals are attainable — honest. The catch is that getting these things may require some trade-offs and sacrifices, so you should set your goals carefully.
Unfortunately, that’s rare. I learned this by mistake when I was assigned to edit the Money Make-Over feature at the Los Angeles Times
Our Money Make-Overs worked like this: Readers would write to us, volunteering to turn over all the information about their families and finances in exchange for being hooked up with a top-notch financial planner, who would give them a detailed assessment of where they stood and how they could attain their goals. Each individual or family that volunteered to be a Make-Over candidate filled out a form, which stated their income, assets and what they wanted in life. I read those forms — hundreds of them — to determine which candidates to feature and which financial planners would fit their needs.
The problem? The more applications I read, the more the goals appeared to be the same. Everyone, it seemed, wanted a secure retirement; a college fund for the kids; and, sometimes, a better home. Okay. These are pretty common goals. Maybe everybody does have them. But what about wanting to travel the world? What about wanting to take a gap year? What about wanting to quit your job? Or buy a Tesla? Live on a boat? It seemed to me that our readers were…well, boring.
Then I read an application written by a 26-year-old woman. She wanted a house, a college fund for the kids and a secure retirement. But no where on her application did I see information about a spouse or children. Whose college bills was she trying to finance? I called to get more detail. It turned out that she wasn’t married; she didn’t have a serious boyfriend or children even on the distant horizon; nor did she have nieces or nephews, who would need her to help with their college bills. The goals she listed on the sheet were the goals that she thought she might have someday. They were the things that she thought she should make her financial goals. Essentially, she borrowed the perfectly reasonable goals that other people had stated as theirs and said, yeah, me too. In case you’re wondering, that’s not a good way to set goals. Attaining your financial goals almost always requires a sacrifice; sacrificing for things you don’t really want is silly.
What is precious to you now, I asked the 26-year-old applicant. If you could have anything money could buy right now, what exactly would you want? Then we were off to the races. Freedom was big; a car that wouldn’t break down; a better apartment. Some day, she thought she’d also want to buy a home, but not until her life settled down. Meanwhile, she’d love to take a long vacation.
The longer I edited Money Make-Overs, the more I realized that this 26-year-old was more the rule than the exception. Few of us bother to really stop and think about what makes us tick. We don’t sit and visualize the things that we want — the specific things that we alone deem precious. Sure, your goal really might be the bigger house and the better car. But it could just be the freedom to walk away from a job you don’t like.
You can get whatever it is that you want enough to work for. But here’s the problem: If we had given this young woman’s application to a financial planner, the planner would have drawn up a formula for her to reach all of her stated goals. And we would have set her on a path to misery because her stated goals were not her real goals. She would be saving for a fictional child’s education instead of taking that vacation; she would be driving her beat-up car in exchange for a house account for a home she didn’t yet want. Because she hadn’t stopped to dream her own dreams, she would have gotten what she said she wanted, but none of the things that she really cared about.
Don’t do that.
Think about what really matters to you. Maybe it’s vacations; maybe it’s having more time to spend at home with your kids; maybe its a Harvard education for your kids. No one knows but you. Write down your goals and make them tangible. Google makes it easy to investigate the cost of almost anything — from a Harvard education to a golf cart. How do you make a goal liken “spending more time with your kids” economically tangible? Think about what that means to you. Does it mean a four-day work-week; longer vacations; being done with work by the time the kids are out of school? Once you know the details, you can figure out how much it would cost you in lost wages or savings.To solve a long-term riddle like what you need to save for a comfortable retirement, check out our retirement planning guide.
Lastly, set your goals on paper to make them tangible and to communicate what you want with your family and the other people you love. You’ll probably need to make some sacrifices to get what you want, but that may not be as tough when you focus on the fact that you’re going after something truly precious. Once they know what you’re after, your friends and family may support you in a thousand different ways — just as they do with the rest of your life. That can make the journey easier and more pleasant too.