Many times we set “bad” financial goals like going on a vacation, buying a computer, or paying off the house. Why are these not “good” goals? It’s not because they are not worthy of pursuing, it’s because they are not specific enough. A good goal is well-defined. That is, it contains three necessary elements: (1) a detailed description of what is wanted, (2) the dollar amount needed, and (3) a specific target date for completion. Additionally, a good goal requires one to consider specific spending and saving strategies that they will implement to accomplish the goal.
Each goal should be written in a format similar to what follows:
A. Brief goal title (for example: Vacation Home)
1. Detailed description–describe in as much detail as is necessary (and reasonable) to identify exactly what you want. Be specific in your description; do not use vague words or expressions like “nice,” “comfortable,” “big/large,” “about,” “around,” “till the money runs out,” “fully loaded,” “upscale,” “luxurious,” etc. For example: 3 bedrooms, 2 bathrooms, 1500 square feet, fireplace, .25 acre lot, white picket fence, mountain view, no more than 75 miles from Colorado Springs, Colorado.
2. Dollar amount–total amount you will need to accumulate by the target date. If you will be saving only a down payment, list the total down payment and show it as a percentage of the entire cost. For example: $50,000 down payment (20% of $250,000).
3. Target Date–indicate a specific month and year. For example: November 2025
B. Spending and saving strategies you will use to accumulate the necessary funds. For example: Cut back on entertainment. Obtain a second job. Take sack lunches to work instead of eating out each day. Sell truck. . . .
Well-defined goals can provide the focus and motivation to help us ignore the advertising voices that would “steal” our money. And, with well-defined goals guiding our spending decisions, we can more easily resist the pressure to “keep up with the Joneses.” Those who successfully do these things may, ironically, find that the Joneses are trying to keep up with them!
