3 Key Aspects to Goal Setting
As other bloggers are discussing their goals for 2007, I thought I would add my two cents to how to set financial goals. As a manager setting goals for employees in my prior career, I have some experience of what makes goals successful and why some goals fail. Looking back there are four key areas in goal setting that worked for me:
1) Make Goals Ambitious yet Attainable
I keep on hearing that goals should stretch a person, so they can be all that they can be and have all that they can have. I do not disagree with this; however I disagree with the word stretch. Many time people think that they need to sacrifice to reach these goals, in other words they have to do more with less. When they believe they are pushed too much, they are more likely to quit on the goal, especially at the first sign of failure. Goals are easier to attain when they seem more easily reachable not a stretch where they believe there is a possibility of failing.
Thus, it is important to see yourself reaching the goals that are set. Goals can be ambitious. Yet do not see it as a stretch (with hard work and sacrifice), rather just taking a large step forward to where you want to be. I guess my issue is stretch sounds like a mid-evil torture experience while ambitious sounds like the race to the moon. Which would you rather participate in?
Also, setting stepping stones to attaining an ambitious goal makes attaining a goal easier. By seeing yourself making the milestones (or at least getting close), you refuel your batteries for making the rest of your goal. For example, if you want to save an additional $5,000 in a year set up milestone of $1,250 for each quarter.
2) Make Goals That Are Ease to Memorize
When I first took over as manager, I went over the goals. For many, there must have been at least 15 goals. When I asked the employees how they did, they rambled on about what they did but not about their goals. They had no idea what their goals where except a few who read them before our meeting.
Thus, the key is to have 3 to 5 goals that can be remembered at any time. This way how you live during the year can be in alignment with these goals rather than forgotten about a few weeks after creating them.
Note, goals can have several action steps. Thus, instead of lowering credit card interest rates and paying off 2 credit cards, you can have a single goal of improving your credit card debt by $5,000 this year and having it paid off in 3 years. Now, the action steps for this goal can be paying off 2 credit cards and calling credit card companies to lower rates. So what is the difference? Having an ambitious goal of reducing credit card debt in 3 years with a milestone goal of $5,000 this year can have many action steps, some of which you may not know about now. Thus, you may call the credit card company to lower rates and pay off 2 credit cards this year. Yet, instead of thinking you are done with your goals for the year, you may be able to find a 0% interest rate card to transfer some of your other card’s credit balances to this 0% card. Thus, have a few overall goals that cover several smaller action steps that may be added or changed during the year.
3) Make Goals Passionate
Really look at the goals and understand the reason for doing it. If you are doing a goal that someone else (e.g., your spouse) wants you to do yet you really do not want to, then the goal is usually forgotten about a month later. I found when I told my employees their goals were, they usually nodded their head and lost interest in what we were talking about. Thus, differentiate your goals between what you feel you should do and goals you want to do. Then re-look at the goals that you should do and to find out how it can benefit you. The more energy you have for reaching these goals, the easier it is to attain them. And on the flip side, do not arbitrarily set goals for you and your spouse if they do not buy into the goals you are setting.
4) Review Your Goals
It may sound obvious, yet usually forgotten about till year-end, especially when you do not feel that you are meeting them. Many financial bloggers are good at doing this by updating their net worth each month. Goals may not need to be reviewed that frequently yet you should wipe the dust off the goals and review them at least each quarter.
