Last month, I began writing about the process of taking control of one’s own financial condition. It’s common to outline any process by describing a series of steps, and that is the form I have chosen for writing about this particular process. The steps I’ve described roughly follow my experience as I learned to take responsibility for my money, or lack thereof.
Most recently, I wrote about step 6, getting out of debt. Eliminating the money you owe to other people and companies is a process in itself. Although I’m describing this process of a series of steps, it is not necessarily necessary to wait until one step is completed before beginning the next. This next step is a good example.
If you have debt, you can begin the next part of the process, setting goals, before you finish paying what you owe. You might believe it’s late in the process to start talking about goals, since you may have heard somewhere that it’s “wrong” to attempt to start a process without clearly defined targets. I disagree. No matter where you are going, everything I’ve written about so far in this series applies in the same way.
At some point, it’s important to ask yourself why. Why bother taking control of your finances? Why focus on saving and investing as much as your income as possible? Why think about ways to earn more income? The obvious answer is to grow your net worth. It can be a challenge to find a deeper answer, but usually there is something.
SMART goals are not so smart
If you’re involved with business management, you’ve probably heard about “SMART” goals. I’ve written about the “SMART” concept on Consumerism Commentary, most recently when I formed my financial goals for 2008. To be “SMART,” a goal should be specific, measurable, attainable, relevant (or realistic), and time-based. For example, earning $10,000 in sales commissions during December could be a “SMART” goal for someone.
Forget about “SMART.” It focuses on nothing that will help you yet. Rather than trying to determine how much money you want to have, start thinking about what you’d like to accomplish within your lifetime. Don’t be specific and don’t concern yourself with whether the goal is attainable. A good life goal will set you on a journey, and the journey is more important than the goal itself. On this journey, it’s common to discover new aspects of yourself, and these aspects will sometimes encourage you to change your goals. That’s nothing to worry about.
Your goal should be less like one a business might have and more like a mission or a vision, though it doesn’t have to be lofty. Here are a few examples.
- Help alleviate global hunger and poverty
- Encourage arts education
- Bring peace to the Middle East
- Provide every opportunity for my family
Long-term goals vs. short-term goals
Look at the big picture. Decide what your place in the world might be. Once you set a major life goal, you have a direction for your first few steps. Your goal might change, so be flexible. But until then, make every decision with this long-term goal in mind. Your life goal may manifest itself in different ways. For example, if your goal is to encourage arts education, there are many paths you can take. You could earn a degree in education and become a teacher. You could start a foundation that offers grants to programs that promote arts education. You could be a financial planner who donates some amount of money to an arts organization every year.
Any two people could choose drastically different paths with the same goal in mind, and the path will have more of a bearing on your short-term financial goals than the destination. The teacher will need to find the money to enroll in a college to earn a teaching degree. The person who wants to start a foundation might have to start with $1 million or more.
If visualization is motivational, consider writing goals down. To follow a standard form, write your long-term life goal at the top of a piece of paper. In order to achieve that goal, understanding that you might never fully achieve it, what are some of the smaller milestones you must achieve? For example, the teacher must earn a qualifying degree. He must also earn a teaching certificate. The individual who wants to help bring peace to the Middle East may want to earn a degree in international relations and be elected or appointed to a political position. Each of these accomplishments consist of another level of goals.
If this structure is beginning to sound like an outline, that may be the form your goals should take on paper. Each larger goal requires a number of smaller goals.
We don’t need to think about finances until we get to the lowest level. I’ve heard people say, “My goal is to earn $1 million by the time I’m 30 years old,” and I want to get away from that type of thinking as much as possible. Money is not the goal; money is only a tool that can be used to help you reach real goals. For example, one of the sub-goals involved in becoming a teacher is partaking in an accredited college program that offers an education degree, either a bachelor’s degree or master’s degree depending on your needs, at completion. In order to receive this education, there are additional sub-goals, including the ability to afford the education. The money might come from loans, scholarships, fellowships, grants, or your own income, but this is where finances finally come to play in process of setting goals.
Everyone has a life goal. It may be a calling, like helping to cure AIDS in Africa, or it may be a personal goal to be the best mother you can be. You can consider this your mission. Without defining one (or more), financial goals have no context. Money is nothing by itself. Getting out of debt is a goal, but only so far as it gives you the flexibility to use your money for a better purpose. What’s yours?
Updated September 16, 2011 and originally published December 8, 2008.