Setting achievable financial goals, part 1


I’ve heard many times that the secret to getting things accomplished is to set goals and achieve those goals. Well, just setting goals is far too simplistic, because as humans, we all have the tendency to oversimplify the thinking required to achieve something difficult and meaningful. For example, when my kids want to buy something, they generally look at the price, say $100, and think “I’ll be able to save up $100 by the end of the month because I’ll just really work hard and save the money”, then they announce to their family and friends that “I’m saving up to buy this $100 thing”, when in reality they’ve taken virtually no steps toward saving except deciding that it would be great to have one. Nearly every single time, the kid gives up after a few days and forgets about the whole thing because they didn’t take the steps necessary to achieve an ambitious goal.

roadAs an adult, I’ve learned that setting an ambitious goal takes thought and deep planning. For example, I’ve done some fairly extensive road trips in my lifetime, crossing the country on motorcycle and numerous car and van trips. A novice traveler may decide to go to Atlanta, lets say, then pull up their GPS, punch the destination in and announce that it’ll only take 9 hours to get there. If they leave by 8 in the morning, they’ll be there by 5pm! No need to figure in hotel costs, dinner costs, time spent at rest areas, and numerous Starbucks breaks! Yeah… It doesn’t work out like that. Taking a trip to Atlanta takes far longer than the 9 hours the GPS says, and from my years on the road, I know that it’ll take 2 days to get there, so you might as well pack a well-stocked cooler with food and drinks, comfy blankets, clothes for the next day, and plenty of music and money for the trip.

Same thing with financial goals. An person with little financial experience will tend to oversimplify a complicated goal. Saving up to buy a $5,000 car, for example, isn’t as easy as putting $300 back each month until the goal is achieved for most people. To begin with, they have to come up with an extra $300 each month to put toward their new car fund, and odds are, that wont necessarily be as easy as they assume it’ll be. They they have to be able to use a budget to make sure they don’t spend that extra $300 they’ve worked for on something trivial and mundane. Thirdly, they need to move the $300 into the savings account and not let it sit in checking (where it’ll be more inclined to be used on other purchases). Lastly, and this is what tends to hurt people the most, they have to be able to resist the urge to spend the car savings account on other things. When it starts getting up there, like $2,000 and higher, the urge  to treat yourself to a nice sushi dinner or to get that upgraded sports cable package. Sitting on that much money tends to burn a hole in people’s pockets and that thwarts many a well-begun plan.

lp400s35Another sure-fire way to cripple your goal setting prowess it by reaching too far. When I was a teenager, buying a Lamborghini Countach was my life’s goal. It didn’t matter that the price for one was close to $250,000. I decided I wanted to own one and I’d figure out a way to get one. Well, life happens, and with 10 children and mortgage to worry about, that hot red Lamborghini just doesn’t look like its gonna happen anytime soon.1985 Chevrolet Camaro Z28 IROC-Z My goal was too far ahead of my ability and isn’t realistic. Now, I could set my goals on something else, say that blue 1986 IROC-Z that I’ve always wanted, and figure out a way to get one by the time I’m 50 (perfect age for a guy to own a car like that, I might add). That’s a goal I can achieve within my financial constraints and retirement goals, and would be within my ability to realistically plan on purchasing with proper planning.

In part two, I’ll go over ways we can stop the cycle of killing our own goals, and actually go about achieving our money goals.