As someone who helps people design plans to meet their financial goals, I’m extremely interested in how we set goals, and why they do and do not work for us. While a stream of motivational quotes and speakers showing up routinely on our social media feeds might have us believing that we must set aggressive goals, pursue them with ruthless determination, and never give up until we attain them, for many people, the level of rigidity attached to those “never give up goals” is actually more of a deterrent than a motivator.
It is hard to know what we’re going to want a month from now, much less a year, five years, or twenty years down the road. But to avoid waking up each day and wondering “how did I get here?” or feeling like somehow life is happening to us or around us, without our input, it’s important to give ourselves some direction about what we want in life.
The Importance Of Goal Setting
Goals gives us direction. If we think about our life as a map of the world, we can either say, “I’m content to end up anywhere on this map,” or, “Here are some places I’d like to go, and some things I’d like to see.”
That’s really all goal setting is–looking at your options, and identifying the ones you want to prioritize in life. After all, most of us are not actually completely indifferent to where we end up. And taking an “any which way the wind blows” approach to life leaves a lot up to chance. While we might look back pleased with where the wind blew us, it’s also quite possible that we’ll end up wasting our days and money on something that’s not really important to us. So, if you happen to have a preference about where you end up or where you visit along the way, it’s extremely important to pick a direction you want to go, and then start thinking about how to get there.
Let’s shift that analogy to think about finances. If you’re equally happy with the outcomes: retiring at 55, taking a year off to travel the world or stay home with your new baby, declaring bankruptcy, and losing your home, then it’s fine to proceed without any goal or direction. But if you look at the map of financial possibilities, both good and bad, and you are drawn more to certain outcomes than others, then it’s important to take that first step and identify what you think you want. We’ll explore techniques to get there over the remaining posts in this series. But it’s hard to plan a route if you have no destination in mind.
Making Goals Flexible
You might wonder, “How can I set goals when I’m not sure what I want or what my future holds?” or, “What if an amazing opportunity comes along that I didn’t see coming? Will setting goals interfere with my ability to be spontaneous and live life in the present?” The good news is, no. Goals don’t have to lock you in. They are actually less permanent than tattoos. They should change with us as we get clearer about what we want from life. Maybe you don’t know when you’ll want to retire, whether you’ll want to own a home, or quit your job to travel the world, write a book, or be a stay at home parent. The secret is, you don’t need to. You just need to be willing to take your best guess.
I remember taking myself through through this exercise a few years ago. In my twenties I had some big goals for myself — pay off my student loans, save 15% of my income for retirement, and buy a home. After I bought my house (the last item on my financial “to do” list for that decade of life), I became a bit aimless. I got lazy with how I spent my money, often buying things that I could afford without giving much thought to whether I really wanted them. For awhile, it was sort of freeing to be able to go out and buy something and not feel financial stress about that choice, but then I started to notice that all that aimless spending was sort of bringing me down. I felt like I was wasting money that I knew I would want or need someday, I just didn’t know what I would want it for.
So, I made myself think of something that sounded kind of great to be able to give myself in the future, and I started saving to put wood floors into my house. Over a few years the savings account and the money in it evolved in this sort of a fashion:
In three years I changed the goal multiple times. You might say I didn’t know what I wanted, and you’d be absolutely correct. The point is, it didn’t matter. Having something that I thought I wanted motivated me to reconnect with intentionally spending and saving money. When I finally figured out that I really wanted to start my own business, the money that I needed was there. The temporary goals actually allowed me to be more spontaneous in my decision making because I didn’t have to wait to save up the money I needed or take out a loan.
We don’t need to set our financial goals in cement. In fact, I like to think of them as more like those movable archery targets. We put them out there to guide us, but we can pick them up and move them as we go. Sometimes the moves are drastic turns, other times they’re just minor adjustments to the course. If you decide to start saving for a down payment on a three bedroom house today, but five years from now you’d rather have a paid off tiny house and use the money you would be spending on a mortgage to travel or save for an early retirement, that’s great. Nobody says you have to keep those targets where they are. But by putting a few out there, you’re giving yourself a reason to think about intentionally earning and saving money today for something you’ll value tomorrow.
So take some time to think about what you really want. Look at the map of financial possibilities that exist in the world, and start to identify what’s appealing to you. What do you think you’re going to want a year from now, five years from now, twenty years from now? Challenge yourself not to leave spaces blank, but remember, it’s perfectly okay to write in pencil. In order to keep working towards our goals, they need to evolve with our vision for the life we want.
This is the first post in the series: Planning for the Life You Want