Financial Planning Goals
Jim Collins wrote about Big Hairy Audacious Goals (BHAG) in his best-selling book Built to Last. He describes BHAGs as "clear and compelling, needing little explanation; people get it right away." Goals need to be specific and leave little doubt about what they want to accomplish. I recently received a financial planning questionnaire where the individual wanted to own half of central Texas. A big goal for sure, but not specific, nor realistic.
Setting a financial planning goal that is generic or vague is not beneficial. Wanting to retire with a lot of money is not a goal. It tells us nothing about when you want to retire or how much money you'll need. For example, a specific goal would be retiring in five years with no debt and $5 million in assets. The more detailed your goals, the better the planning. An ambiguous goal will get you nowhere – garbage in, garbage out.
Here are a few ideas to help you with your planning if you're contemplating retirement.
- Set a target. When do you want to retire? Do you want to retire at a certain age or asset level? For example, you can say I want to retire at age 65 or when my assets reach $5 million.
- Set a destination. Where do you want to retire? Do you want to say in your current home or move to a new location? If you move, will it be more or less expensive? Moving from San Diego to Topeka will be cheaper than moving from Topeka to San Diego.
- What do you want to do in retirement? Will you volunteer? Golf? Fish? Travel? Hobbies can be time-consuming, expensive, or dangerous, so plan accordingly.
- Writing your thoughts down will convert your dreams to goals. When you transfer your dreams from your mind to paper, you will start making them a reality.
- Review and adjust. Once you commit your goals to paper, review and revise them often. Annually evaluating your goals, and tweaking them accordingly, will keep your plan on track.
- Work with an accountability partner. A financial planner can act as your accountability partner or coach, helping you focus on your goals. If you mention your goals to someone else, they will hold you accountable and ensure you're moving in the right direction.
Here is an example of a specific retirement goal: I want to retire at age 65 with $15 million in assets and live in Lake Tahoe, California, where I can hike, bike, fish, and ski. I also want to travel two times per year. In addition, I want to volunteer 10 to 20 hours per week and donate at least 10% of my income each year to charities and organizations I support.
Are you ready to commit your dreams to paper? If so, congratulations. If not, hire a Certified Financial Planner™ to help you organize and quantify your hopes, dreams, and goals.
We all have dreams. But in order to make dreams come into reality, it takes an awful lot of determination, dedication, self-discipline, and effort. ~ Jesse Owens
September 6, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
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