Rebooting Your Financial Goals for 2018


In this episode of the Science of Economic, we provide a step-by-step plan for how to become a true goal setter, and how to apply goal setting to your financial plans.

  • Learn how to properly establish “the why” of goal setting.
  • Find out why goal setting makes it much more likely you’ll take the right action.
  • Learn how goal setting increases motivation and increases your chances of overcoming obstacles.
  • Learn the three essential categories of financial goal setting and find out how simple each is to understand and implement.
  • Discover how to apply the ““S.M.A.R.T.” formula to goal setting.

Here are a few Action Step takeaways from this episode:

 

Podcast Transcript Episode 12

Doug Fabian: Are you ready to move closer to economic freedom in 2018? Do you have clear financial goals for the new year? Goal setting can make your journey to economic freedom a reality.

Male Voice: The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy, sell or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio. This program is sponsored by Mercer Advisors. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.

Doug Fabian: Welcome to the Science of Economic Freedom. I’m your host, Doug Fabian. This podcast is all about helping you achieve your financial dreams. We call that economic freedom. This program is about your journey to achieve economic freedom for yourself and your loved ones. Today, we want to help you identify your next step on that journey.

This is Episode 12 – How to Reboot your Financial Goals for 2018. We are once again at the beginning of a new year. Many people get all charged up about New Year’s resolutions, but studies have shown that by February most of the bold statements about change have been abandoned.

Not so with goal setters. If you set goals, you get more done. This is a proven scientific fact. Setting goals increases your chances of success. This does not mean that all goals are attained by the goal setter, but the probabilities are significantly increased when you set goals and you follow through with some basic steps.

I mentioned the term goal setters. Are you a goal setter? Do you always set goals, sometimes set goals or have big goals? Or do you never set goals? Where do you stand? I, personally, have always been a goal setter. It has just felt right to me to write down what I want to accomplish.

So when the new year comes to an end, I am ready to set new goals or update my old goals. My process begins by reviewing the goals from the previous year and look at what was accomplished. I have had years when I hit most of my targets, others not so much.

The point is, that without goals, we have no destination. We don’t have a planned outcome. So on this podcast, I’m going to present goal setting for those who have never set goals in 20 minutes or less. If you are a goal setter, my simple strategy to reboot your goals for 2018 will help you in getting the new year started right.

I always liked the rebooting function when it comes to technology problems. Most problems can be solved with a reboot. If you’re a goal setter, then this discussion will definitely be a reboot for you.

Goal setting for 2018. This will be simple, easy and straight forward. Before we discuss setting financial goals, let’s talk about why goal setting works and what it could mean to you.

Goal setting establishes an outcome. If you don’t know where you’re going, how will you know when you have arrived? The greatest benefit of goal setting is that you have a defined outcome.

Next, setting goals properly establishes the why. Why do you want this goal? When you dive a little deeper into why you are much more likely to act. For example, if you want to achieve economic freedom, which will be your family’s financial security and your personal peace of mind, you now have the reason behind your goal and you’re much more likely to take action.

Goal setting increases motivation. When you have set a goal for yourself, and it is deeply personal, you just want to act. You’re motivated. You could overcome self-doubt, procrastination and even fear. Goal setting increases actual results.

In the Harvard University study titled Setting Goals – Who, Why and How, evidence shows that setting goals can increase the achievement of those goals significantly. Know your destination, finding your why, having the motivation and higher results are all reasons why we should set financial goals.

One final point on why you should set goals. Most people don’t set goals. So if you do, you’re in the minority, and this group has a higher success rate over those who don’t. So let’s do this.

Hang with me for 10 more minutes and I will give you my 5-step process to setting your goals in 20 or less. Most people who have never set goals don’t know where to begin. So let’s break this down into categories that can help you choose a goal that fits. You can do this on a single sheet of paper.

This is a good place to remind you to go out to the scienceofeconomicfreedom.com, and in the Resource section of the website we have published a special report on goal setting. We advise all listeners to review this report. In it are instructions and worksheets. You can also revisit Episode 4 of this podcast.

Back to our goal setting for 2018. If you wanted to make financial goal setting as easy as possible we could break all financial goals into three categories. The rate or return of your investment portfolio, a specific savings target, and a purchase of or investment in a specific asset.

Let’s start with rate of return. What rate of return do you desire to achieve on your investable assets over the next five years? Now, the answer must be realistic and reasonable. By that we mean a rate of return that can be achieved by investing in the financial markets; 3%, 5%, 7%, 10% would all be reasonable answers.

Now, if you were to answer 20%, that goal would be require hitting a home run speculating, taking on excess risk, or exposing yourself to large losses. If you selected the 10% goal, this would require a large allocation to the stock market, which may be too risky for some people. Your goal must fit you.

Setting this rate of return target as a five-year goal also removes the need to get this rate of return next year. We cannot predict what the markets may do, and you could have a year where you don’t achieve the goal because of circumstances outside your control.

The purpose of the goal is to get you moving in the right direction with your assets. Setting this goal will help you evaluate your current investment strategy. Also setting a rate of return goal helps you overcome the fear of loss. What is clear and obvious is you cannot achieve even a modest rate of return sitting in cash.

Now, let’s talk through a second simple financial goal. This is a savings goal. This could be as simple as saying, I want to save $500 a month. Another example would be to fund your Roth IRA. A bigger goal would be to fully fund your 401(k).

Having a saving target is a great goal. It’s easy to understand and monitor. It’s easy to put into action via payroll deduction or automatic savings. Just sweep the savings number out of your account each month and this goal has nothing to do with investing. This goal is about how much money you want to save each month. It’s about cash flow. The key issue is why. Your goal could be economic freedom, retirement, college savings or any other worthy reason.

Finally, let’s talk through our third example of a simple goal you can set for 2018. This would be the purchase of an asset. This could be your first home or rental property, a business, or even a depreciating asset. Something you wanted all your life like a boat or a car.

This is something that is really meaningful to you. You really want to make this investment. When you have an asset purchase you want to make, your first step is to map out the cash that is needed. Then, a savings plan to achieve this first target. An example would be a down payment.

Next, think through a timeline on this goal and a target amount of money you are trying to accumulate for that purchase. Then, how much can you get done in 2018? That’s all there is to it.

There are obvious extensions to these goals. You could be in retirement and need a monthly income stream from your investments. You could switch the savings goal to an earnings goal. You could have a debt that you want to retire. Here you focus on the debt rather than the purchase of an asset. How much are you going to pay down on that debt in 2018?

Goal setting does not have to be complicated. What we have laid out here is simple, easy and straightforward. So here is your first action step. If you were to identify three goals that are important to you what would they be? You can have more goals, but for those of you who have never set goals, starting with three is about right.

In our special report, we have a section for drafting your goals. And we also have many examples for different age groups in this report. This is when you write down your goal ideas. Do this now.

Now, once we have our goals in draft form, we can fill out more details. There is a process in goal setting called SMART proofing your goals. SMART is an acronym for clarifying statements about your goals. Here’s how it works.

S is for Specific. The more specific, the better. Having a goal of saving $500 per month is very specific.

M is for Measurable. $500 per month is very easy to measure; also, monitor and track.

A is for Attainable. If your goal is to save $5000 per month and your gross pay is $6000 per month, this goal would not be attainable. You can’t set goals that are outside of your reality or your means to achieve them.

R is for Relevant. A goal must have meaning to you. This is your why. There must be a deep reason for the goal like achieving economic freedom for your family.

T is for Timeline. There must be a due date, or a date when you would review this process. Economic freedom is not going to be accomplished for most people in 2018, but we can move down the path. We could be more financially secure in 2019 than we were in 2018.

Set your goals, write out some clarifying statements and now, you put your goals into action. Again, there are worksheets in our special reports that have these clarifying statements spelled out. Under each goal write out three to five action steps you need to take to start moving towards that goal.

This could mean opening up a brokerage account. Setting up automatic savings to your Roth IRA. Seeking a new investment strategy. Finding a CPA. Finding an estate attorney. Researching where you want to buy a rental property or your first home. These are all steps towards achieving your objective. Let’s go back to the process.

Step 1. We’re going to select three to five financial goals to work towards in 2018.

Step 2. We write out these goals in draft form.

Step 3. We write clarifying statements about each goal. The SMART process.

Step 4. We write three to five action steps we need to take to get started on the path to achievement.

And Step 5. We act, and we revisit our goals once a month.

That’s it.

Again, a reminder, most people don’t do this. There is no statistic that we can find to validate the number of people who set goals versus the number of people who don’t. But isn’t it clear the group you want to be associated with is the goal setters? Isn’t it worth 20 minutes of your time to set your goals? And this one step can help you achieve more in 2018 and it doesn’t cost a thing.

Now, two more action steps that will help you move down the path of economic freedom in 2018. Update your balance sheet. This is your statement of financial condition. A list of your assets and liabilities.

After the great year of 2017 in the investment markets, you should be pleasantly surprised at the progress you made towards building up your balance sheet last year. There is a special report at the scienceofeconomicfreedom.com to assist you with your balance sheet if you’ve never built one. 

Lastly, take the time to review your spending plan. Your spending plan is your income less your expenses. Another way to describe it, your spending plan is your cash flow. We have another special report that awaits you at the scienceofeconomicfreedom.com. Both reports will help you move towards your goal of economic freedom.

Now, here is a summary of the action steps from today’s podcast.

# 1. Become a goal setter.

# 2. Write your draft goals and follow our five-point plan.

# 3. Visit the scienceofeconomicfreedom.com and review our three reports. Goal setting, spending plan and balance sheet. Remember, you can send me an email. My email address is [email protected] That’s [email protected] This is Doug Fabian. Thank you for listening.

[Music playing]

Male Voice: The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy, sell or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio. This program is sponsored by Mercer Advisors. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.

1) Become a goal setter.

2) Write a draft of your goals, and your action steps, do so by following the “S.M.A.R.T.” formula.

3) Go to www.scienceofeconomicfreedom.com and review the three special reports: Setting Your Goals, Spending Plan and Balance Sheet Basics.

 

 

Male Voice: The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy, sell or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio. This program is sponsored by Mercer Advisors. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.

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