Financial freedom. We all want it, few of us achieve it. I should know because as a financial planner, that is the most common answer I hear when I ask people, “What is your most important financial goal?” It’s a great goal but how do we achieve it?
As planners, we’re supposed to help people achieve their goals. So, we meet with our clients and ask about their goals. We expect to hear back a well-defined objective that we can turn into a spreadsheet or a financial projection and create a portfolio to reach that magic number. In reality, few people know what their “goals” are. People have dreams, desires, ambitions, aspirations – a complex set of feelings around what they want, but rarely do people have “goals”. When I ask the question, I’ll hear things like “I want to invest in real estate”, or “I need to save on taxes”, but these answers are given because they’re easy to come up with. What’s really in their hearts and minds, stays unsaid.
I loved it when a person I met recently said, “I don’t know what my goals are. What should be my goals? How do I set them?”
Goal setting is a process that is divided into three stages: exploration, definition, and action, and it allows us to really think about what we want and why we want it before we turn to numbers. Each step of this process should help you reduce the complexity of your thoughts and feelings into a set of actions that you can take to get closer to your dreams.
The first step in goal-setting process is to get clarity on what you want. This requires asking yourself some deep questions and listening very carefully to the voice inside you that may have been quiet for some time.
From the day we’re born to the day we die, we’re influenced by other people – parents, friends, teachers, co-workers, and increasingly, social media. Our parents have goals for us, our teachers influence our self-image, our Facebook and Instagram feeds are full of images of people who have a fabulous life. It’s easy to start thinking that you want what you hear in people’s voices and see in their pictures. But your true dreams may be left unexplored unless you make a conscious effort to bring them to light.
Take the time to look deeper inside and ask yourself whether what you think you want is really what you want and that you’re not chasing dreams that aren’t yours. If you’re honest with yourself, your true dreams will come to the surface – and you may be surprised at what you discover.
It’s OK to accept that your dreams are different from what you’ve been thinking your whole life. You’ll be thrilled to feel the peace that comes from being in sync with yourself and pursuing what you really want.
Whatever you want to achieve, there are trailblazers who’ve come before you and their story will be an inspiration for you and a blueprint to follow. Is there someone you admire? Is there someone that you’d love to be more like? Chances are there are individuals you admire, but haven’t had the chance to learn more. Find out their life story, read their biography, understand what made them successful and what you can learn from their path.
This type of a role model is very different from the “influencers” that you may see every day. Your role model will have the qualities of character that are important to you, they’ll have accomplishments that will motivate you and they’ll have overcome struggles that you’re likely to encounter as well. Having someone to look up to and emulate will stir your inspiration.
This is by far the most important question you’ll need to ask yourself if you’re serious about pursuing your dreams. We all have internal obstacles and limiting beliefs that will keep us away from our dreams if we don’t explore them; bring them to light and find ways to overcome them. Do you know what those emotional barriers are? How deep do they go? How much have they affected you in life?
I was fortunate to go through a planning exercise recently and finally come face-to-face with the source of a lot of my internal obstacles. Every time I asked myself what’s holding me back, my mind went back to an episode in kindergarten that I still remember like yesterday. All these years I’ve been affected by a painful experience in my early childhood that I didn’t even realize was there. It was so liberating to finally define it and start to figure out how to deal with this new revelation and how to gradually change.
If you look closely enough, you’ll know who you need to become and you can start the process right away.
You can make life very hard on yourself and go it alone. Or you can find a guide who can help you get there faster. What you need to ask yourself is, what knowledge and resource gaps do I have in achieving my goals? Can I close these gaps quickly, before my goals begin to suffer? Do I believe in my future enough to invest in it wholeheartedly?
Who should be your guide and how do you find them? Looks for experts, look for people who specialize in what you want to do because their advice will be invaluable and more than pay for itself. My business coach has been helping advisors for almost thirty years and he answers my questions before I even know what to ask. As daunting as our challenges seem to us, chances are someone else also has the same challenges and your guide will have helped those who came before you. Learn from their experience, don’t wait for yours to scar you.
You have habits and thought patterns that have gotten you where you are - and you need to keep some and ditch others. When it comes to money, it’s all about our habits. Take stock of what makes you happy about your money habits and what you’d like to change. Focus on one habit at a time and create a new one to replace it. There is so much information out there about how habits are formed and how to change them, if you take the time and find a good source, you can use it as a guide to form new habits.
Financial freedom means something different to everyone. Your net worth, however, is something only you know and measure. Most of what we do in life requires financial resources and having a high net worth means having plentiful resources to accomplish our goals.
There are several ways to grow your net worth. Your growth path depends on your strengths, challenges and preferences. Do you need to focus on growing assets or reducing liabilities? Do you need to earn, save or invest more to reach your targets?
This is where your guide can help you both set your net worth goals and recommend the best way to grow it. If you selected the right guide who has listened to you carefully and taken the time to get to know you, they’ll set the right targets and create the appropriate plan to reach them.
I typically start with two goals: (1) one-year net worth goal; and (2) a five-year net worth goal.
Practice makes perfect whether it’s learning to play the violin or managing your finances. In the first year of your journey to financial freedom, your first goal should be gaining the knowledge and creating the habits that will set you up for long-term success. That’s the reason you should set an ambitious but realistic goal for net worth growth. Some of the actions to get there include:
Record your net worth goal at the beginning of the year; implement your plan and measure it at the end of the year. Did you accomplish it? What worked? What do you need to change?
It’s tempting to set 20-year targets and a big vision for our future, but having a narrower focus on the next several years is a good stepping stone to your financial freedom. When setting a five-year net worth target, you need to consider several factors, including:
As your net worth grows, along with your knowledge and confidence, your perspective is likely to shift as will your goals. You’ll always have a 5-year goal but each year your goal will be bigger and bolder if you’re successful at every step on the way.
This is where the work starts and how faithfully you stick to your plan will determine whether you’ll see results or not. Being “too busy” isn’t an option despite work and family obligations that are sure to interfere and pull you in a different direction.
Put consistent, regular time on your calendar to devote to your finances and don’t cancel unless it’s a real emergency. What you put in for an effort to achieve financial freedom is what you’ll get in the end. Small, consistent actions trump heroic but ultimately ineffective moves to build your portfolio. It’s much easier to start small and stay with it to make compounding work for you vs. a big “catch up” later. Catching up rarely works and you miss out on opportunities to build real wealth by waiting too long.
The bottom line about setting goals is that they all involve a state of being that’s different from our current one. It’s unfamiliar territory that’s hard to see, touch and feel; therefore, it’s hard to define the steps needed to get there.
Start by putting your true feelings to the forefront. The more successful you are in the first few years of building your net worth, the more ambitious your goals will become and the more your dreams will expand. What you envision for yourself with change with each step along the way. Be true to yourself, believe in yourself, invest time and resources in your dreams. Financial freedom is in your reach!