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The Power of Setting Specific Financial Goals
Are your financial goals very specific in what you want?
No?
Well what if I were to tell you that if you set a specific financial goal that your chances of achieving it go up?
Would you set a specific goal then?
In this post I will cover three benefits to setting a goal. So you can understand exactly why your chances of success go up when you do.
What is a Specific Financial Goal
First let’s cover what a specific financial goal is.
Instead of having a goal that is: “I want to retire”, a specific goal would look like this.
“I would like to have fifty thousand dollars in passive income within 10 years.”
Easier Decision Making
When you have a detailed goal set, it is easier to filter out what is the necessary and what is not.
When you goal is “I want to retire” there is no framework for comparing decisions.
In our specific goal example you could decide between investing in real estate that you need to manage and a dividend stock. The stock, is more passive than the real estate so you would lean towards that.
When decisions are more complicated we tend to not make them. Thus the easier your decision making process the more action you will take.
Increased Confidence
When you set a specific financial goal it is easier to create a plan to achieve it. When you have a plan for achieving your goal you are more confident in your ability to achieve it.
When you don’t have a goal and a plan on how you are going to achieve it then everything is one big unknown.
Setting a specific goal and plan then you have confidence that if you follow the plan you will achieve your goal.
You Will Save More Money
My favorite benefit of setting a goal is that it has been shown that when you set a financial goal you end up saving more money.
That’s right you save more money!
Two studies looked at parents saving for college and 401K participants to assess savings habits.
The studies found that people saving for college or retirement who set a specific goal saved more money then those who were saving but had no target.
Action Step
Your action step is to sit down and set a financial goal.
Then I want you to create a plan on how to get there. If your goal is to save a million how much a month are you going to save?
Once you’ve got that down start working on it.
Now as you’re doing this I want to remind you to not freak out that it’s not the perfect number.
There are so many factors that go into retirement planning. There are many things that are going to happen between your retirement date and today.
So getting a “perfect” number is impossible. It is more important to get a number down. Then start working towards that target.
It will allow you to have more confidence, you will save more and you can always tweak as you need.