Don’t Just Dream; Execute By Setting Goals
By Lynnette Khalfani
Author of The Money Coach’s Guide to Your First Million
Too many people dream of becoming a millionaire but have no real plan for how to achieve it. Well, you can’t become a millionaire just by dreaming, wanting, or wishing for wealth. As you develop the framework for your millionaire’s budget, think about planning for the future and reaching some of your bigger goals. So many times we get caught up in daily tasks and activities that we forget about setting substantive goals for the future. But in order to accrue substantial wealth, it’s essential that you write out your short-, medium-, and long-range goals. Some of you may not have thought about your own goals much lately. Perhaps your life has been consumed by your children’s world; their needs and wants always come first, and you constantly put your desires on the back burner. It’s a mistake to do that. Financially speaking, you can get yourself so wrapped up in another person—whether that individual is your child, partner, or parent—that you neglect yourself and fail to engage in smart, practical financial planning. You don’t want to look up 20 years from now and think that you should have managed your money better when you were younger.
To immediately improve how you handle your finances and make a giant leap toward becoming a millionaire, one of the most important things you can do is to write out your personal goals. This one act alone will help you build a foundation for a lifetime of wealth. If you are married or in a committed relationship, I suggest you do this exercise with your partner. Write your individual goals first, and then share your goals with the other person. Ultimately, we are all individuals with our own unique dreams and ambitions. Yet, for those of us involved with significant others, it’s crucial that you make a habit of setting— and reaching—your goals together.
I want you to think of your goals in the context of how long it will be before these goals can be realized. Short-term goals should be something that you can accomplish in a relatively brief period of time, say in one to two years, at most. Medium-term goals can be classified as those that require two to ten years to accomplish. Long-range goals are those that require ten years or more to fulfill. To jump start your thinking, I’ve included a laundry list of goals below. Some of these may be relevant to you; others may hold no significance. The idea, however, is to give yourself permission to focus on the things you want to accomplish in the future—goals you may never have acknowledged to yourself, let alone written down or verbalized to someone else. Among the goals you might pursue are:
Eliminating credit card debt.
Buying a new home.
Saving for a college education.
Investing for retirement.
Starting a business.
Establishing a cash cushion.
Paying for a wedding.
Saving for a new baby.
Purchasing a vacation home.
Traveling around the world.
Buying a boat.
Paying off student loans.
Making a large contribution to church, synagogue, etc.
Buying a new car or a second car.
One of the most important things you can do to reach your goal of becoming a millionaire is to write out your personal goals.
The Write Way
No matter what your goals, you should know that writing out your plans gives you a far better shot at making them happen. In fact, written goal-setting is a phenomenally powerful act as demonstrated by a number of high-profile cases.
A compelling example of the power of written goal-setting is represented in a 1979 survey of Harvard University students which found that 84 percent of them did not set goals. Another 13 percent of them did set goals, but didn’t bother to write them down. And only 3 percent of the graduating class had written goals and an action plan. Ten years later, researchers resurveyed the group. The 13 percent with unwritten goals were earning double the income of those with no goals. But here’s the whopper: the 3 percent of the student population with written goals earned 10 times as much as the other 97 percent!
Clearly, written goals are important. But do you realize how it is that written goals are able to propel you to reach success? Here are a few reasons why goal-setting works: |
PURPOSE: Goals give your daily and long-term actions meaning and purpose. This helps you stay motivated when you realize that you’re engaging in certain financial behaviors for a reason and not just randomly acting.
ACCOUNTABILITY: Goals also make you accountable. If you find that you’re regularly falling short of your goals, it could be that you’re not really committed to them.
STRUCTURE: Goals provide a framework or structure from which you can operate and achieve your objectives. Many of us need this structure to plug away at reaching our goals, especially long range visions.
DISCIPLINE: Goals spur you along to be consistent and disciplined in your actions since you know that a lack of discipline on your part will cause you to deviate from your plans, thereby jeopardizing your chances of hitting your goals.
SPECIFICITY: Goal-setting forces you to not just think about what you want in general terms, but to write down your aims in concrete terms. Adding the element of specificity to your goals makes you far more effective in taking the practical steps required to reach your objectives.
Written goals give you purpose, make you accountable, make your financial plan concrete, supply you with a discipline to follow, and identify specific areas to focus on.
Setting Smart Goals
Your goals have to matter to you. They have to be achievable. You want to push yourself and stretch to achieve a goal without putting it so far out of reach that you become disillusioned and give up. Remember, failure is not an option for a Millionaire-in-Training. And I believe|
that’s what you are if you’re reading this book and taking this advice seriously. I’m also a believer in setting the appropriate type of goals. SMART is an acronym that describes goals that are:
Specific
Measurable
Action-oriented
Realistic
Time-bound
Specific goals are the exact opposite of vague, hazy dreams. With the latter, someone might say, “I want to be rich,” or, “I want to save money for my kid’s college education. ” Those are just general wishes, and chances are they won’t be fulfilled. But the person who sets a specific goal would define (in writing) exactly what “rich” means from his or her point of view, as in “I want to have a net worth of $5 million. ” A specific goal regarding college savings might be: “I want to save $80,000 for my son’s college tuition. ”
When you make goals measurable, you quantify the objective you’re seeking. In doing so, you ensure accountability and track your progress. For instance, to know where you’re going, you have to know your starting point. So if one of your goals is to have no debt, you need to know how much debt you currently have. If you add up your credit card bills and they total $20,000, then you make your goal measurable by writing down something to the effect that, “Over the next two years, I want to eliminate my $20,000 in debt. ” In light of this goal, you know that after one year, if you’re staying on task, you should be able to measure your progress and find that you’ve knocked out half of your debt, or $10,000.
Action-oriented goals require you to do something, not just think about doing something. Not weigh your options. Not analyze a certain situation. Not research possibilities, and so forth. No, in |order for the goal to carry weight, you must act upon it. So let’s say you initially thought that, “I want to start a business,” was a goal. That’s far too vague. You have to amend that statement and write something along the lines of: “By the end of the month, I want to create a business plan for my new interior design business. ” This way, you know you actually have to draw up the business plan. If you look up sample business plans on the Internet or investigate what lenders want in a business plan, that’s fine as a prerequisite to what you have to do. But ultimately, it’s the actual writing of your business plan that you need to accomplish.
Realistic goals are neither too ambitious nor too easy to accomplish. If you set the bar so high that it’s impossible to reach your goal, you’re only setting yourself up for failure and disappointment. By all means, make your goals challenging to reach, but be realistic in your expectations. Here’s a case in point. Let’s say one of your goals is to return to college and obtain an MBA. You already have a Bachelor of Arts degree, and you know that the MBA program you want to attend typically takes two years for the average fulltime student to complete. If you work 40 hours a week, will take courses only part time, and can study only on the weekends, don’t expect to finish the MBA program in 18 months. Given the confines of your situation, a more realistic yet still challenging goal might be: “I want to earn my MBA in two and a half years. ”
Any worthwhile goal is time-bound and includes a deadline by which the goal should be met. When you include a deadline, you make your goal time-bound. Therefore, it’s not good enough to say: “I plan to buy a new home. ” Instead, when writing out your SMART goal, put down something like: “Two years from now, I plan to put down a 10 percent down payment toward the purchase a $450,000 Tudor home with four bedrooms and two bathrooms. ” This goal is clearly specific, measurable, action-oriented, realistic for many people, and time-bound.

From The Money Coach’s Guide to Your First Million by Lynnette Khalfani; Published by McGraw Hill April 2006; ISBN: 0071470816 copyright 2006