How do I stay on track for my financial goals?
Q: I have a number of financial goals, but I always seem to get off track easily and forget what I’m shooting for. I’m a 52-year-old, single woman, don’t have any kids, and bought my first home on the Hamilton Mountain just last year. At the beginning of every year I promise myself that I’ll get my financial affairs organized, but somehow I just don’t. I’m afraid I’ll get to retirement and not have done what I should have done. How do I stay on course?
A: Life is distracting and unpredictable. If you do not have a system to keep you both focused on where you are going and selfcorrecting when you get off track, then you definitely won’t end up where you want to be. Think of it this way: if you and a friend wanted to drive from Hamilton to Las Vegas and just got in the car and started down the highway, do you think you’d have a very good chance of getting there? Well maybe, but the odds would be very, very low and your route wouldn’t be very efficient. But if you set the GPS in your car at the very beginning of the trip and allow the device to continually correct course along the way, it is inevitable that you will get there. In fact, the GPS will give you a set route, right from your driveway to where you’re going in Vegas, as well as an estimated travel time. But rest assured, that will likely not be the actual route to get you there ultimately, and the time frame will probably be off, too. There will be traffic jams and detours, and more than a few pit stops for food, sleep and to stretch your legs. Along the way, you may even wish to make a small diversion to hit a tourist attraction, then recalibrate to get back on track.
Your financial goals will work the same way. The first action is to determine your destination. Where is it precisely that you want to go? What is the specific financial goal? Think of it as having to program into the GPS the exact geographic co-ordinates of where you’re going. Perhaps it’s saving to fund an early retirement, or to pay off your mortgage sooner or save for your next vehicle. This becomes your end goal, so you must be very explicit.
But every end goal has tens, or hundreds, of minor waypoints to get you there. So, your second action is to figure out the single most relevant step to get you moving along the path toward your end goal. It needs to be the smallest, most minuscule action that can be easily and quickly implemented. For your Vegas trip, that might mean gassing up the car or taking your luggage out of the closet. For your early retirement goal, it might be opening a specific savings account. If you want that mortgage gone sooner, then find out what amount of money is required to cut the mortgage end date by just one year. And if it’s your next set of wheels, then decide how much money you’d be prepared to tuck away each month for this purpose.
It must be the simplest “next step” to inch you along toward your end goal. Otherwise, it will simply feel too big and you’ll stall right where you are. And that always feels deflating, discouraging and demotivating. This may be what has happened to you previously. Likewise, if something comes along to distract you – which will inevitably happen in life – then you merely have to reset to a new next, best tiny step. If you don’t, then it’s just too easy to forget where you’re going.
Keep progressing this way, with micro movements, to get you back on track and keep you on track. Remember the GPS? It keeps the Vegas destination in mind, but it’s recalculating nearly every second.
Financially, when something throws you off — and it will — you can immediately recalculate by determining the next best step. There are no dead ends, only detours, even if you have to circle back a bit.
A road trip from Hamilton to Vegas is calculated millimetre by millimetre. And any financial goal works in the same incremental way. Set, correct, set, correct. And when you get to Vegas, send me a postcard. I’d love to hear about your journey, detours and all!