The Art of Setting Financial Goals
- Campfire Wealth
- Jul 20, 2023
- 5 min read
Written by: Campfire Wealth | Time, Money, Health
People struggle with goals. Ask someone, “What are your financial goals?”, and you may get a blank stare or even a look of fear.
You’re busy and just getting through the day may seem overwhelming. Let alone taking time to think about the future. And not only that you need to deal with the element of money which makes just about everyone uncomfortable.
Setting financial goals is a skill. It requires time, focus, and practice. If you struggle to set goals and achieve them don’t worry. Read on and we’ll get you on the right track.
Why are goals so important for your Financial Life Plan
There is no way around it. Your goals are going to require some combination of time and money. The two most important inputs into any Financial Plan. In order to enjoy today and prepare for tomorrow you need to evaluate and strike the right balance between the two.
Time and money are the fuel needed to build the life you want. It’s important that you spend some time planning how to use them!
Let’s say your goal is to lose 10 pounds (we are big fans of having health goals as part of your plan!). Losing weight requires a smaller amount of money but time every day over weeks or months. Where does that time come from? What trade-offs are you making?
Maybe it's a trip to Paris. Well, you’ll need a decent amount of money. Plus the vacation time or flexibility to be overseas for a week or two. Where does the money come from and do you have the time?
These goals are both achievable. They just require clarity of the time versus money balance. Once you have clarity you can evaluate the trade-off you’re making to see if the benefit is worth the cost.
If you are in your 20s you can afford to make some mistakes. “Overspending” time and money to capitalize on experiences that may be tougher to enjoy later in life is fine. Social media is filled with “save 20% and you’re on the path to riches!” Save some, but spend some too. You have time to make it up.
If you’re in your 40s or 50s the right balance can become more important. Add in a spouse or partner, a dog, kids, etc. The balance equation for time and money changes.
Regardless of your age and resources, setting goals will always give you a financial advantage over just drifting along.
What makes setting goals so hard?
If you had to write down three goals right now, could you? For many people, this is actually an uncomfortable request! As advisors, we are even encouraged not to ask that question. At least not in that exact way. Why? There are a few reasons:
Many people are too busy just trying to get through today to even worry about tomorrow. Life is stressful! People don’t dedicate time to pick their heads up and plan ahead.
Setting actionable goals is a skill. General goals like “get fit” are easy to write down, but don’t lead you anywhere.
Many goals involve money. And most people aren’t sure how to balance spending versus long-term saving.
Setting a goal and not reaching it can be painful
None of the above reasons are good enough to avoid setting goals. Goals in your financial life plan are absolutely critical. They are probably the most important piece of any type of financial plan. It just takes some practice and a good amount of self-understanding.
The Art of Setting Financial Goals - YOUR WHY
As an advisor, we talk to clients about goals constantly. I used to just ask directly - “What are your goals?” Unfortunately, for the reasons listed above this tends to be a terrible approach. If the client is scared into silence we tend to get responses like:
Flexibility, Freedom, Security
Have $X million in the bank
Retire at X date
Take care of my family’s financial future
The problem with the answers above is they are too vague. They lead to ZERO action.
Let’s say we meet with Alison and we’re focused on goal setting. She shares that she wants to “retire early”. Our first question isn’t, “When would you like to retire.” We want her to dig deeper. Why do you want to retire early? More freedom to do what you want? More time with family? More naps? The ability to pursue more hobbies?
So we find out Alison wants to spend more time with family. Why? So they can share more experiences together? Have more meals together? How much time? Do they have time to spend with you?
Alison responds she would like to travel more with her kids before they head off to college. Great! How many trips a year, where would you like to go, and when? Now we can start to narrow down the cost and time required. Money/Time balance!
Now we have actionable goals! We have a trip or trips to specific destinations and a timeframe. Alison can evaluate, based on time and money, whether she needs to retire early or not. Maybe there are changes in her work life she can implement to allow her to meet these goals AND still earn income.
Or maybe not. She may have money but doesn’t have the time. Either way, she now has a much clearer picture of what she is really hoping to achieve and a list of action items to get there.
Hard Life Now, Easy Life Later
Nothing with money is easy. It’s so intertwined with emotion and life experience. It isn’t easy to be honest with ourselves regarding our thoughts and feelings about money.
We equate money and wealth levels to personal worth. If someone makes more or has more money than me, they are somehow better. This is a huge mistake and leads to bad decisions and overall unhappiness. As an advisor to clients with more money than me, I struggle with this quite often.
Don’t make comparisons! The behind-the-scenes of people’s financial lives aren’t as pretty as it seems on the surface. We are all chasing different things and even those change as we go through life. Financial success is an individual sport where you make up the rules on what winning looks like.
Do the hard work now and set YOUR goals. Understand what really makes you happy and plan around that. Understand the WHY of your goals and create clear actions. Share these goals with others to help with accountability.
If you can do these things, you’ll get increasingly better at balancing time and money. And that’s the whole game. Decide what’s important (goals) and use your time and money to make it happen (action).
Here is a quick exercise to help set a goal:
What is an experience you’d like to have within driving distance (under two hours so you can do it in a day)?
How much time will it require? (Time)
What is the total cost to make it happen? (Money)
Now what is the first available day on your calendar? Add it. (Action)
Tell someone what you’re going to do! (Accountability)
Look forward to your experience and then enjoy it! (Fulfillment)
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