How to Set and Achieve Financial Goals

Setting a time frame and quantifying your financial goals is key.


Two baseball players arrive at spring training. Player A declares this is the year he becomes an elite ballplayer. Player B has the same aspirations for the upcoming season, only he defines what constitutes an elite player. His goals are a .300 batting average, 30 home runs, and 100 runs batted in. He also takes stock of how he did last year when he batted .247, hit 17 home runs, and batted in 68 runs. He meets with the team's hitting coach to improve his swing and for other tips on how to be a better hitter.

Which player do you suspect achieved his goals for the season?

Most of us dream of things we'd like to do in the future or perhaps what we would like our lives to become. When it comes to the world of financial planning, these aspirations need to be translated to goals in order to determine how best to achieve them.

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One of the initial discussions most financial advisers have with a new client centers on the client's goals for their money. Typical aspirations for clients might include funding their children's education or saving for their own retirement. In order to translate these aspirations into goals, the following must be attached to these aspirations:

A time frame. A goal must have a time frame in which it needs to be achieved. For college, it is generally near the child's 18th birthday. Retirement is typically at a certain age. If the time frame is open-ended, how will you know when the money is needed? How will you track your progress? How will you know how much you will need to save over time?

You can certainly have multiple time frames for a goal. For example, you may need $X for the first year of college for one child. But your second child is seven years younger, and, therefore, your time horizon is different.

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Goals need to be quantified. In our baseball example, Player B knew what he was trying to attain, and he was taking steps to achieve his goals. Saving for retirement is the same. What is a comfortable retirement? How much will it take annually to fund a comfortable retirement? Start out by looking at your current level of savings, and try to quantify how much you will need annually to live comfortably in today's dollars.

Take this annual amount and subtract things like a pension or social security that will provide you with monthly income. The balance is what you need to fund. Translate this "gap" into an amount that you need to accumulate by some date, and now you have a retirement accumulation goal that is quantified and has a time frame. Keep in mind, you will also need to factor in the impact of inflation.

For example, you might determine that $750,000 is needed in 15 years to fund your retirement. Armed with this information, you can start looking at where you are and what you need to do to achieve your goals. Some typical questions:

  • How much will I need to save each pay period?
    • Are my investments allocated to allow me to achieve my goal?
      • Am I fully using all retirement savings products available to me including company retirement plans, IRAs, and other savings and investment options?
        • If I own a business, how will the value of this entity factor into my plans?
          • Have I looked at all sources of income available to me during retirement?
            • What milestones do I need to shoot for at certain time intervals to know whether I am on track?
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              Monitor your progress. Establishing quantifiable, measurable financial goals with a set time frame is just the first step. The real work comes on an ongoing basis. You need to monitor your progress on a regular basis, because things change. For instance, the stock market may rise or fall rapidly, you might lose your job, an illness could occur, or you might find yourself ahead of schedule in terms of the amount accumulated.

              It is important to monitor your progress and adjust when needed. It is also not uncommon for goals to change over time. If this happens, you will need to start the process again.

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              While there are no guarantees that doing all of this will lead to achieving your financial goals, in my experience those who fail to plan their financial futures are simply planning for failure.

              Remember: Financial planning is an ongoing process, not a one-time event.

              Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill. where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. He recently cofounded Retirement Fiduciary Advisors to provide direct investment and retirement planning advice to 401(k) plan participants. Follow Roger on Twitter and LinkedIn.