This Year Make New Year’s Goals, Not Resolutions
By Cal Brown, CFP
The Monitor Group

By now, you have probably broken your New Year’s resolutions!  In fact, breaking resolutions is so common that many people don’t even make them anymore.

Successful people don’t make New Year’s Resolutions – they set goals.  They are goal-oriented, and these goals drive them to success.  What is success?  The best definition I ever heard is this: “Success is the progressive achievement of worthwhile goals.”  These goals can be in the area of finances, career, family, physical fitness, spiritual growth, and any other area of life that is worthwhile.

People don’t set goals for one very simple reason – they don’t know how!  It’s easy to make a resolution; you just think of something you’d like to have and tell someone that this is your resolution, and that’s the end of it.  And if that’s all there is to it, it’s no wonder they get broken so easily!

Setting goals properly involves a few simple (but very important) steps.  First, they should be written down!  Simply verbalizing them to someone or thinking about them does not create the momentum to enable them to be accomplished.  If you don’t write them down, they are not goals, they’re just wishful thinking.

Second, goals should be laser-clear specific, not general.  For example, many people say, “I’d like to be rich.”  But what does that mean?  It is better to have a goal such as, “I want to have income of $5,000 per month, adjusted for inflation and taxes, by the time I am 62 years old.”  This is specific, measurable, and provides some reality that can be calculated.

That statement also contained the third important thing about setting goals – a deadline.  It said, “…by the time I am 62…”  A goal without a deadline simply will not ever happen.

Many people who have been taught goal setting have done all three of these steps, but they have not experienced the power of goals.  For years I was taught that I should set goals, and I would faithfully follow these steps, but I saw no results that were directly attributable to the goal-setting I had done.  That’s because there was one thing missing: daily, monthly, quarterly, and annual monitoring of action plans.

Although all aspects of setting goals are important, the most important part is developing an action plan.  Plans are composed of action steps.  These action steps represent intermediate goals that drive the achievement of the “end-result” goals you want.  In fact, the action plan is more important than the goal itself!  A dream might be compelling and exciting, but without detailed action plans, the dream will never become a reality.

In the most excellent book, DNA Leadership Through Goal-Driven Management, Jim Ball says, “Your systems and habits determine what you will achieve and become.  To the extent that you alter and improve your goal-setting and goal-achieving systems and habits, you will improve the results that you can realize.  Goals must become so internalized and integrated into your thoughts that you move toward your goals automatically without thinking about them.”

In the area of financial planning, it is critical to follow these steps.  If you are unsure as to how to do them, you should engage a Certified Financial Planner™ to help you.  He or she will help you to create laser-clear and specific goals.  You will also be asked to establish a deadline or time frame for each goal. Together, you and your advisor will design an action plan that will ensure you take the necessary steps to make sure that those goals get accomplished.

What are some of the most important financial goals?  Here are a few examples: 

“I want to be completely debt-free by December 31, 2005.”
This is clear, specific, compelling, and it has a deadline.  It’s also written down!  But it is missing one thing – action steps.  A plan must be devised to determine first whether that deadline is possible (i.e., how much debt are we talking about?), and if so, what must be done now in order to get moving toward that goal.

“I want to provide 50 percent of my child’s college education in 15 years.”
This is not quite as specific, because we don’t know the dollar amount.  Is it a specific college, or the average in-state school?  Or do you want your kid to go to a private institution?  Also, no mention was made of inflation.  But once these things are quantified, it is quite easy to determine how much should be put away monthly, and then determine the pros and cons of different types of investments, tax-advantaged plans (such as 529s) as well as whether the money should be in the child’s name or the parent’s name.

There are other goals that must be set in the areas of retirement, risk management (insurance), estate planning, income taxes and charitable giving.  Again, if you don’t feel confident about setting goals in each of these areas, let a Certified Financial Planner™ help you.

Alice asked the Cheshire Cat, “Which road should I take?”   The Cheshire Cat asked Alice, “Where are you going?”  Alice replied, “I don’t know.”  The Cheshire Cat answered, “Then either road should get you there!”

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Cal Brown is Vice-President of The Monitor Group, Inc., a fee-only financial planning firm located in the Tyson's Corner area of McLean, Virginia. As a nationally recognized wealth management firm, The Monitor Group provides investment and financial planning services to more than 190 high net worth client families in Northern Virginia, Maryland, Washington, DC and across the country. Click here for more information about Cal and The Monitor Group, Inc.

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