One of the most common mistakes people make when planning their finances is diving into an investment or financial plan without setting clear goals. This might sound simple, but it’s far from it. Setting goals forces you to confront various aspects of your life and future, sometimes even your own mortality, in ways that can be uncomfortable.

Financial goal-setting isn’t just about the numbers — it’s about understanding your dreams, values, and priorities. It’s about making deliberate choices that reflect what truly matters to you!

We all know this, so why do we have a tendency to avoid setting goals for ourselves?  

1. It’s hard. The process of setting financial goals can be complex and intimidating.
2. Life is unpredictable, and what you envision for your future might change over time.
3. Setting goals requires confronting personal and sometimes uncomfortable truths about your life and future.
4. Assigning a monetary value to your goals can be daunting.
5. Committing resources to a goal that is 10+ years away can be scary because your life might look very different by then.
6. Decision Paralysis: Many people find it overwhelming to make decisions about their financial goals.

The Misleading Simplicity of Goal-Setting

The financial services industry often makes goal-setting sound straightforward, but in reality, I find that it’s one of the hardest parts of financial planning because it’s the most emotional.

The good news is that once you’ve established what you’re working towards, the rest of the pieces start to fall into place pretty quickly. When you start making a plan that is centered around you and the things you actually want out of life, it allows you to focus on what truly matters to you, and a lot of the rest just becomes background noise.

Example: How Goals Lead to Better Investment Decisions

Danielle is new to investing and excited to start putting some of her money to work. She’s been reading about AI ETFs and thinks they might be poised to deliver some big returns in the future. Before buying the investment, Danielle decides to write out some of her financial goals. With inflation, life has become quite expensive, and even though she makes good money, she finds that her paycheques don’t stretch as far as they used to. One of her goals is to become more financially secure. She realizes that without an emergency fund, her ability to withstand any surprise expenses or emergencies is very limited, and this is contributing to her anxiety. Danielle  decides that even though the potential returns of the AI ETF are tempting, she’s probably better off putting her money in a high-interest savings account so she can access it quickly and without risk of losing it.

The Anatomy of a Financial Goal 

For a goal to be useful in planning, it needs to be specific and well-articulated. You should be able to answer the following questions:

• What am I trying to achieve? 
• How much will it cost me?
• When do I want to achieve this by?
• Why is this important to me?
• How high does this goal rank relative to my other priorities?
• Can I be flexible on the timing or the cost of this goal?

Steps to Create Your Own Personalized Goals

1. Brain Dump: List every goal, wish, dream, fear, thought, worry, pressure, and stress related to money. Whatever is swirling around in your head, put it on paper. 

For example: 

• I want to buy a house.
• I want to make better choices with my money.
• I don’t feel in control of my finances.
• I want to find passive income streams so I can work less.
• I want to start a business.
• I’m overwhelmed by my debt.
• I want to feel confident that I’ll be able to retire someday.

2. Categorize: Label each item on your list as either  a tangible goal (goals with a clear outcome such as buying a house or getting out of debt) or an intangible goal (ones that may feel a little abstract and centred around emotional rewards like feeling more in control of your finances).

3. Detail Tangible Goals: For each tangible goal, answer the what, when, why, how, and how much. (Anatomy of a Goal section above!)

4. Turn Intangible Goals into Tangible Ones: Translate your intangible goals into tangible ones. For example, if your goal is to feel more financially secure, think about what that means. Maybe it involves feeling more prepared to withstand surprise expenses, in which case a tangible goal could be to save up 3-6 months of expenses in an emergency fund. Maybe you need to create a more realistic/motivating system for  budgeting, or maybe you need to find some affordable critical illness insurance so that if you do get ill you will be able to afford care and continue to pay the bills.

5. Refine Your List: Add these new tangible goals to your list and detail them as in step 3.

The end result is a list of tangible objectives you can start working towards. Setting clear goals makes the rest of your financial planning much more manageable. With well-defined goals, you have a clear direction and purpose, making it easier to prioritize your actions and allocate your resources effectively. This clarity not only reduces stress but also empowers you to make informed decisions that align with your long-term vision.

Remember, financial planning is an ongoing process. As your life evolves, your goals may shift, and that’s perfectly normal. The key is to remain flexible and revisit your goals regularly to ensure they still reflect your current priorities and aspirations. By doing so, you’ll be better equipped to adapt to changes and stay on track to achieve your financial dreams.

Stay tuned for next week’s newsletter where we’ll look more closely at how to use this list to guide your investment decisions.

Download our goals worksheet to start setting your financial targets today—click HERE to grab yours!