Whilst I’m not a gambler, I’d be willing to bet that if you are not happy with your current financial situation or the direction you are heading…chances are you have never written down your financial goals.
The power of written goals is hugely underestimated. In fact at this point you might be tempted to stop reading. You’re thinking “Yeah, yeah, I’ve heard all about goals. Give me something exciting about building wealth”. If that is what you are thinking I would ask you to seriously consider whether or not you are in the financial position you’d thought you’d be in at this stage of your life? If not…then having clearly defined written goals might just be the missing link.
Quickly recapping on the past 3 weeks – Week 1 we covered why it’s more crucial than ever to build wealth outside of super (in addition to inside of super); Week 2 – the importance of creating a surplus cash flow & “paying yourself first”; Week 3 was all about having a Game Plan across the key areas of Building, Freedom & Protection. However, before embarking on any of that…the first step is actually putting down on paper what you are looking to achieve financially.
One of my favourite books of all time is “7 Habits of Highly Effective People” by Stephen Covey. Habit 2 is “Begin with the end in mind”. This point is critical when looking to build wealth for the future. What does financial success mean for you? How will you know when you get there? What will it look like? What will it feel like? Whilst the journey is far more important than the destination, keep in mind the idea that “future direction determines present action”. Having clearly defined written goals that you review and rewrite at least yearly, may just be one of the most critical elements in helping you create financial freedom for yourself and your family.
Clarity is critical…
You might have heard of the Yale University study. In 1953 they surveyed the graduating MBA class and asked them who had specific, written goals for their future. Only 3% had written goals, 14% had goals but not written down, and 83% had no goals at all. 20 years later they surveyed these same Yale graduates and they found that the 3% who had specific written goals were worth more in financial terms than the other 97% put together.
If you are not in the 3% of the population who has written goals for your financial future I want to challenge you to join this group. Set aside 1 hour in the next week to focus on this. If you have a partner…then get them on board…you are in this together. It’s important that you are on the same page, even if one of you tends to take the lead with the finances.
Map out your specific goals for the following;
Short term; 0-2 years.
Medium term; 2-7 years.
Long term; 7+ years.
Short term you might want to pay extra off the mortgage or start investing for the future. Medium term you might want to buy an investment property and cover a good education for your kids. Long term you might be planning to be debt free by “retirement” and cover a comfortable cost of living including yearly overseas travel. Importantly, with your long term goals, “begin with the end in mind” and decide at what age you would like to be financially free and at that point what level of spending (in today’s terms) you’d like to be able to cover on an ongoing basis.
Whether the Yale study is an urban legend or in fact true…developing clear & specific financial goals is a crucial first step in the process of achieving them. But don’t just do this in your head. Write down your goals. Display them. And review them on a regular basis. This is the first step in joining the top “3%”.
Matthew Morrison is the Director of Wealth Advisory at The Practice, a Personal Wealth & Business Advisory firm based in Parkville, Melbourne. Matt along with The Practice team are committed to and passionate about developing and implementing financial strategies to enable clients to Fuel their Family’s Future.
Matt and The Practice team can be contacted via http://www.thepractice.com.au or (03) 8888 4000.