Start Your Financial Plan the Right Way This Year

What is the big deal about setting goals?

We all have goals bouncing around in our head, but why is it that every January goals are suddenly important? Is it because if you don’t have goals, you won’t know if you succeeded? Conversely, if you don’t have goals, you’ll also never know if you’ve failed.

At Nick Nauta Financial, we love goals. Goals are the foundation of the financial planning we do for our clients.  Not goals that you commit to memory after reading some famous person’s Facebook post. Not a SMART goal either. We want to set goals that inspire us to be better. We want to be better fathers, husbands, brothers, and friends. We want to do work that is meaningful and impacts the lives of others. We want to use our talents to improve the community and help those in need.

Writing down our goals wasn’t easy. We had to define our values, admit our fears, understand what we need to improve upon and find someone willing to keep us accountable.

When you create goals for your financial plan, you need a similar approach. Here are four tips for setting your financial goals for this year.

1. Start with Why

Anyone can set a goal. Let’s say I want to get healthy next year. My goal is to lose ten pounds by March 2nd. Let’s see how many boxes I checked off in the SMART goal test. My goal is specific (lose 10 lbs), measurable (I can measure pounds), attainable (I believe so), realistic (I’ve done it before), and time-based (March 2nd). It sounds reasonable, but you may have noticed that something is missing.

If I want to become healthy, I need to incorporate why into my goal. The reason why I want to become healthy is so , I can spend more time on this earth. It will give me more energy to chase my kids around. More chances to watch them grow up. More time to spend growing old with my wife.

It’s not being healthy that matters, it’s what being healthy allows me to do. To me, it’s worth making the sacrifice to get up early to work out and saying no to food that doesn’t fuel my body.

The problem with most financial goals is they’re too SMART. We fail at achieving our financial goals because we haven’t defined what they mean to us. Saving money isn’t for a rainy day. Saving money gives you the ability to do more of what you love. How many people’s last wish on their death bed is for more money in their rainy-day fund?

The goals of your financial plan need to be personal. The reason cookie-cutter templates don’t work for financial planning, is that we all have different ideas of what we must do to live life successfully.  An inspired financial plan helps you by balancing living a meaningful life today with saving for a secure future.

2. Admit Your Fears

In Michael Kay’s book, The Feel Rich Project, he outlines how fear can stop us from living our true desires. He talks about how our early childhood money memories can shape our future behaviors out of fear.

If you’re going to set a goal for yourself, it should be one that helps you overcome your fears. If you want to live a better financial life, you need to set goals that are out of your comfort zone.

We are hard-wired when it comes to making financial decisions. Based on our history with money, we tend to be savers or spenders. My life is the perfect example of this. If it were up to me, my family would save every penny. If it were up to my wife, we wouldn’t spend everything we had. What I always remind myself is that neither of us is right.

We are lucky to have such contrasting backgrounds. If you have two people rowing on the same side of the boat, you end up in circles.

Right or wrong, we learn our money habits from our parents. When left untested, the lesson we learn about money growing up shape our future behaviors out of fear. By understanding your fears and where they came from, you can set goals to help you overcome them.  Here are a few questions to get you started:

  • As a child, my mother taught me that money. . .
  • As a child, my father taught me that money. . .
  • The first time I earned money, I felt. . .

3. Understand Where You Need Improvement

Chances are you already know what you’re strengths are. If you want to make progress on your financial life plan, you need to work on the things you don’t already do well. August Wilson once said, “Your willingness to wrestle with your demons will cause your angels to sing.”

People that are great savers, tend to have trouble spending. When you learn why you have a predisposition to saving, you can then come up with a plan to overcome your fear. By giving yourself a monthly amount of discretionary spending in your financial plan, you can begin practice spending money without regrets.

One of the significant areas of improvement most of us can use some help on is how we spend our time. We often think of our time as an endless resource. We do accomplish what we can in the time available. When we don’t get things done, there’s more time next week. This year I resolved to think of time as the limited resource that it is. We all are allotted 5,840 hours of time a year, not counting sleep or roughly 112 hours per week. By allocating the time necessary to do the thing most important to you first, you can help ensure your spending your time on what’s most important to you.

Whether it’s time, or how we spend money, we can’t move forward without first addressing what we need to improve. By understanding why your goals are important, what we are afraid of, and what we need to work on, we can lay the groundwork for a goal worthy of achieving

4. Find an Accountability Partner

Setting the right goals is the only way to find true success. Unfortunately, it’s only the beginning of the process. Turning those goals into successful long-term habits is where the rubber meets the road.

In Anders Ericsson’s book, Peak, he teaches us that to be successful at anything, you need a whole lot of practice. To Ericsson, practice isn’t just going out and repeating the process. Practice should incorporate specific goals that impact a particular area of improvement. Deliberate practice requires an instructor with experience. If basketball player shoots the same jump shot every day, he will see greater improvement than if he had instead played a basketball game.

To turn your goals into habits, you need an accountability partner. Someone with experience who can teach you how to practice the little things that will, in turn, help you achieve your goals.

When you are searching for an accountability partner, it’s imperative that they have the skills necessary to take you to the next level.  We recommend interviewing and finding a financial advisor planner with the right experience and style that fits your needs. Download our guide on How to Choose the Right Financial Advisor.

Setting goals that inspire you is only the first step in your financial journey. By having goals that give your life meaning you increase your chance of achieving them. Of course, the things that are worth achieving are sometimes the hardest to accomplish. It takes time to learn new skills, overcome your fears, and understand where you need to improve.

If you set goals that are challenging, you won’t always achieve them. We tend to learn more in failure than success. The people who work hard to get themselves out of a bad financial situation, tend to be those who change their behavior and learn from  their mistake. Those who take the easy way out can find quickly find themselves in the same boat.

As Robert Kennedy once said, “Only those who dare to fail greatly can ever achieve greatly.” What are you going to find out about yourself this year?

Are you ready to start your year off with the right goals? Contact us to schedule your goal setting appointment today. Need more information on creating a better financial life? Follow us on Facebook and sign up for our newsletter.