Your Money_ The Missing Manual - J. D. Roth [12]
So how do you create goals that will guide you to financial success? The first step is discovering what brings meaning to your life.
The Importance of Passion
Goals are more than just wants: You want a chocolate chip cookie or the latest video game, but they're not your goals in life. Goals are about the Big Picture. You should be so passionate about your goals that you're willing to make sacrifices in order to achieve them.
You've probably set financial targets before, and it's likely you've met some of them and failed at others. Some of your goals were probably pretty crazy, like, "I want to be rich by the time I'm 30." That's an admirable aim, but odds are you didn't achieve it. Why not? For one thing, it's vague: What does "being rich" mean? And what would you do if you were?
For a goal to motivate you, it has to be specific. It should also be based on your values and desires. Do you really want to be rich in the sense of simply having lots of cash? Or were you just dreaming about what you could do with that wealth?
To you, being rich might mean owning a goat farm in South Carolina. For your best friend, it might mean being able to start her own business selling wine over the Internet. Whatever the case, you're probably not motivated by the money itself, but by what the money could let you be and do.
Some people have an easy time setting meaningful goals because they know exactly what they want. But it can be tough to know what you want, especially when you're young. With time and experience, you begin to learn what motivates you. You'll find that it's not enough to simply say, "Yeah, I might want to go to France someday. I'll make that a goal." Your goals should make you stand up and shout: "I've always wanted to spend a summer backpacking across France! How do I make that happen?"
If you're 20 years old, retirement probably seems pretty abstract—it's something that people talk about, but which has little relation to your own life. (Actually, retirement seems like a dream to many 30- and 40-year-olds, too!) Something this abstract makes for a poor goal. You know you should save for retirement, but that goal doesn't fill you with passion. But what if you re-framed the question? Think about what does matter to you and how saving for the future can help you to make that dream a reality.
With goals come tradeoffs, but having goals makes those tradeoffs easier to bear. If you're saving 25% of your take-home pay so you can quit your crummy job and start your own business, it's easier to pass up a ski weekend with friends because you know doing so will help you reach your goal that much sooner. When you have a why (in this case, to start your own business), the how (skipping the ski weekend) is a whole lot easier. Chris Guillebeau's story on Reduce clutter gives a real-life example of someone who's made big tradeoffs to follow his dreams.
Once you've established your priorities, you can set meaningful goals that'll help you accomplish more and live a happier life. Your goals will form the foundation of your financial success and give you a framework that can help you decide how to spend money.
Your Money And Your Life: Life Planning
Life planning is a new approach to setting financial goals. Instead of focusing solely on maximum wealth, life planners work with people to find the point where the clients' money and happiness intersect. They help people align their spending with their values.
The father of the life-planning movement, George Kinder, is a Certified Financial Planner and the author of The Seven Stages of Money Maturity (Delacorte,