24 Signs That You Could be in Financial Trouble #23: A Lack of Well-defined Goals and a Plan to Reach Them

In this series I am covering the 24 tell-tale signs that you could be in financial trouble. Over the next few weeks I will be presenting these signs, how to identify them and tips on how to address the issue.

As we reach the end of this series I want to touch on a sign that is a little more difficult to identify. Personal finance is a simple concept on the surface with common advice such as:

  • Spend less than you earn
  • Save some of your income
  • Insure yourself
  • Invest properly

Within this basic framework is a complex set of issues that are as unique as you are. No two people are alike and no financial advice can apply to everyone. You define your own success. It doesn’t matter what people suggest you do because your situation is unique.

Where Do Goals Fit In?

If you lack goals you are lacking a gauge for success. It doesn’t matter what aspect of your life you are considering, without a goal it is impossible to define how successful you are. Goals can be very simple and broad concepts to very specific a finite numbers. Maybe one of your goals is to simply be able to provide a comfortable life for your family. While many people likely share this objective if it isn’t clearly defined in your mind it will be difficult to determine what comfortable means.

This is where specific goals can come in to provide a clear measure of success. You may have a desire to save more money for retirement which could be considered a goal, but how much more do you want to save? Do you want to increase to a certain percentage of your pay? Do you want to max out your contributions? Do you want to reach a certain dollar amount in your accounts? By defining this goal in specific terms you have an easy way to track your progress. If you never set the specific goal you have no direction or method to congratulate yourself or come to a realization that you aren’t doing enough.

Goals don’t have to be just about money either. You need goals in all aspects of your life. For instance, we all want to retire right? So when we say we’re saving for retirement what are we actually saving for? Do you want to start a business? Do you want to live in a cottage up in the country? Travel the world? Buy a yacht? You need to have a vision for what this hard work and saving is going towards. If you can envision the end result it makes it easier to accomplish. Just saving for retirement for the sake of saving because you know you should will seem more like a chore and make it less effective.

Setting Goals Lead to Creating a Plan

When you have created goals the natural action to take next is to create a plan. Once you can picture a goal you instinctively look for ways to accomplish this goal. All too often people know what to do but simply lack direction. If you have a problem with debt you clearly want to get out of debt, but saying that isn’t enough. If you set your goal to get out of debt in five years you now have a clear objective. Knowing the objective you understand that it won’t happen magically so you begin to set a plan in place. You calculate how much you need to pay each month, you call your credit card company to lower the interest rate to make payments affordable or to ensure you get it paid off in the time frame you have determined. Whatever the case is, when you have clearly defined your goals you instinctively begin to create a plan to reach that goal.

Plans don’t have to be complicated. They are there to keep you on track and so you can measure your progress. Plans are also not etched in stone and can and do change. Life isn’t static so your plans will change and evolve as your situation changes so be prepared to be somewhat flexible.

Why is This Important?

According to Psychology Today magazine:

It’s simply a fact: when people have goals to guide them, they are happier and achieve more than they would without having them. It’s a brain thing. Achieving a goal you’ve set produces dopamine, a neurotransmitter responsible for feelings of pleasure. Reciprocally, dopamine activates neural circuitry that makes you eager to pursue new challenges.

Goals provide focus. With no guiding vision or plan, people tend to drift. Goals provide a measuring stick for progress. Goals enhance productivity. They bolster self-esteem. And most of all, goals increase commitment, so you’re more likely to achieve whatever you set out to conquer.

There have been hundreds of studies done that demonstrate how people become more productive and are more likely to succeed when they define goals and establish a plan to achieve them. Another study also suggests those who write the goals down are even more likely to reach them than those who just keep the goals internally. This doesn’t mean you have to keep a log or write down everything but I would suggest putting down the most important few goals on paper and in a place that you will see it daily. Maybe on a piece of paper taped on the wall by your desk or inside your day planner. When these items are fresh in the mind you are reminded what you need to accomplish continue to work in a manner that is productive toward achieving these goals.

Don’t be a Wanderer

Take some time to define goals for yourself and establish a plan to reach them. Living by drifting along and just doing the basics can work but you can achieve more if you take the extra step to define what you want and how you’re going to get there. Not having clear goals or plans doesn’t mean you won’t succeed or that you’ll find yourself in financial ruin, but can have a significant impact on what you achieve and how quickly you get there.

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Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

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