Perhaps this occurs because of my industry and my role in it. But, whenever I ask someone about their goals – be it a client, workshop participant, or even a colleague or friend – they often immediately respond with their financial goals.
And I always respond with some variation of, “no, not just your financial goals…” Even though, ultimately, money enters into the equation.
Let me explain: Often, with financial goals, you can more easily create a viable roadmap for how to achieve it by reverse engineering the gap. So, let’s say you have one or a combination of these as your *financial goals: to save $50,000; to max out your 401k or SEP IRA contributions and on top of that invest $25,000 in a brokerage account; to give $25,000; to pay $10,000 toward a credit card balance; to earn $750,000 gross.
Not to imply that reaching any of these financial goals will be easy, but both your beginning and end points are clear. This clarity gives you a sense of what choices and trade-offs you’ll need to make to reach these goals within the timeline you’ve decided upon. (*These numbers were chosen randomly.)
And this often leads to four common mistakes. Ironically, all of them relate to money.
- You don’t identify the financial component of each of your non-financial goals.
- You don’t create a financial plan for each of them?
And making the two mistakes above is what leads to the two below:
- You don’t manage your cash-flow as well as may be required.
(The money you need to fund your goals comes from the money you have currently.)
- You use an investment approach that doesn’t actually support your goals.
(The timing of your goals is what determines if it is better to keep the money you’re allocating toward your goals liquid (for stability and to protect your principal) or invest it (for growth.)
Plus, every goal you have directly and indirectly drives the decisions you make about your money – sometimes consciously; most times subconsciously – in other areas of your life and business.
So, when you’re not aware of the “price” of your goals, you tend to leave money on the table and waste precious time.
Create Your Roadmap
This is why it behooves you to be as smart as possible and feed your goals what they need: money and a plan – not just your intention. (Another reason goals > resolutions.)
Now for the tricky part: I really wish I could offer up an easy formula to help you create a financial roadmap specifically for your non-financial goals. However, the variables are aplenty.
Instead, I offer the following framework for your consideration:
Count it all & add it up
When you attach a number to ALL your goals and then add it all up, it’s easier (even if shocking) to see what it is you really need your money to do for you – today, tomorrow, next month, next year, in the next five years, and beyond.
Create a timeline
One of the tactics I use and suggest to clients is to practice what I call “time framing.” This is when you segment your goals according to when you plan to achieve it. Is it less than a year; 1-3 years; 3-5 years; 5-10 years; 10+ years?
Some of your goals will be met entirely in less than a year. Whereas other goals require several years to completion. In this instance, what you have to think about is how much money do you want to apply this year to a goal that is in the 3-5 year timeframe.
Determine your allocation style
Based on the numbers you know or have estimated, will you give each goal the same amount of money each week, month, or year? Or, will the amount change based on the goal and where it is on your priority list, as well as your timeline.
Create your plans
There are two things that influence how I think about and approach planning: One is courtesy of my friend, Charlie Gilkey, co-founder of Productive Flourishing and author of, “Start Finishing.” He says that it is important to “…remember that plans only create clarity, not certainty.”
In my opinion, certainty is one of the reasons people (maybe this includes even you) have a hard time assigning a number to their non-financial goals. However, I am of the belief that it’s better to guessstimate and be way, way off than to not guess at all.
The other thing is the reminder that planning is less about the plan and more about what you discover and learn from the planning process.
Yet, don’t make the mistake of creating just one plan.
Despite the way we often tend to talk about plans, a plan is not static. Your plan represents “living” documentation of the actions you need to take, which frequently need to be tweaked in response to what changes occur – in your life, in your business, and with your money. That’s why it is useful to do scenario planning.
Your initial plan, as well as your contingency plans, help you account for the “price” of your goals, so that you don’t unwittingly leave money on the table and waste precious time.
p.s. There’s a guide that can help you with all of this – click here.