Setting Financial Goals
My wife recently ran a half marathon. Three months before the event, she informed me of her decision to enter the race. She then discussed a training plan with an experienced friend. By verbalizing her commitment with two people, she was on the right path to achieve her goal.
Financial planning is a very similar concept – you start by establishing your goals and dreams for the future and then set the path to achieve them. As financial advisors, we help clients communicate their priorities and what they want to accomplish with their life savings. Common client goals include paying for children or grandchildren’s college tuition, comfortably retiring without financial worry and passing their values to their children and grandchildren.
Regardless of your goals – financial or personal – I recommend putting them on paper. More importantly, communicate these goals to someone else once they’ve been determined. Commitment is a very powerful motivator and there is a natural tendency to stick with our decisions once we’ve verbalized them to others.
A research study on human behavior and commitment illustrates this power. Two researchers played the roles of an innocent man on the beach and a thief. The man on the beach got up from his towel and left his belongings while he went for a walk. The thief then strolled by and stole his accomplice’s radio. Only 4 times out of 20 an innocent bystander interfered and tried to stop the thief. Next, they added a twist where the man asked a complete stranger to keep an eye on his things while he took a walk. The thief then appeared and attempted to steal the radio. But this time, in 19 out of 20 occurrences, the complete stranger interfered with the thief. The reasoning behind this is that once a commitment is made, we do not like to let down those who have confided in us.
You may not think of telling your advisor all of your goals – such as getting healthy or lowering your golf handicap – but the next time we are discussing your objectives, I encourage you to be open. One reason advisors have chosen this profession is because we enjoy seeing clients plan for and achieve their dreams. It doesn’t have to be a long term goal regarding retirement; it may be more short-term – like paying off debt or planning for the purchase of a vacation home. If we both know what you want to accomplish, we can lay out a plan to get you there. We may occasionally recommend more managed spending because it can affect what you’re saving for the future, but we will work on a plan to accomplish both short and long-term goals.
By the way, my wife trained hard and had a very successful race. She’s even thrown around the idea of running a full marathon someday. It’s amazing what you can accomplish when you set goals!
For more information, please contact Lisa Reynolds at 513.792.6648 or [email protected].