Having Goals is Not Enough

Two separate conversations I had this week with new clients prompted today’s blog post. In one instance, a couple received a recent inheritance. In the other case, they had just paid off their mortgage. In both instances, multiple options existed. I heard things like home renovations and private schools for kids. I also heard of cutting back on four days per week, retiring early, buying investment properties, paying off investment properties, taking a family vacation, and topping up the super. It went on and on.

In both cases, the problem was not that there were no goals. It was, rather, the opposite. Overwhelmed by too many goals and options. Unable to choose which one to pursue.

Clarity in your financial goals is essential for successful planning. If you have read my Financial Autonomy guide, then you will know that the goal-setting chapter is the first one. In fact, the Financial Autonomy Road Map diagram I refer to throughout the book is where we begin our journey.

Goals must be clear, quantifiable, and measurable to be effective. In two cases I dealt with this week, I went over each goal that my clients rattled off. Then, I added numbers and timeframes. How much will it cost per child per year, and when can you expect to pay for this expense? How early would you like to retire, and what kind of income will you need?

We cannot test if an option is viable without being able to quantify it.

Prioritizing our goals was the key to our success.

For this, I wrote down the client’s objectives on a large whiteboard. (Yes, both meetings took place in our office. This doesn’t occur very often, but it is always nice to have it happen. There is a digital version of online meetings.

Then we played a challenge where each team had to compete against the other. Which one would you choose if you had to pick just one? Each positive response was recorded as a vote in favor of that goal.

Which would you choose, for example, if it was between renovating your home or sending your children to private school? What about cutting back on four days of work a week or home renovations? Renovations or family vacations?

We go through each combination of goals one against another. We total the votes at the end of the process. The goal that receives the most votes is the first objective, and so on.

It is important to prioritize our goals. Money can only be used once. A family vacation in Europe costing $30,000 cannot be used to renovate a bathroom. Prioritization is key to knowing which goal you should focus on.

This exercise was particularly useful to a couple I worked with this week. It allowed them to discuss what was most important and reach a consensus.

This exercise is something I do with clients often. I am always surprised to see that the goal that we decide on is the most important, usually the third, fourth, or fifth item that the client told me at the beginning of our meeting. We would have made poor decisions and implemented a suboptimal strategy if we had worked with the priority of the goals that they said.

We can now analyze scenarios and learn what’s possible. I look forward to diving into these two.

Financial planning is not complete without goals. To help us make the right decisions, goals must be quantifiable.