Less than half of all Australians have a three-to-five-year financial plan, and only 25% of us have any sort of long-term plan (source: Australian Financial Attitudes and Behaviour Tracker, 2018). Does this terrify you? It should.

We continually stress the importance of having goals backed by a personalised financial plan. We feel it’s one of the most critical factors in leading a long, happy and fulfilling life. Let us explain.

What is a goal?

There is a chronic under-education surrounding goal setting in our society. This stems all the way from school and into many adult relationships and workplaces. You probably know what a goal is. But the traditional definition of a goal (“something you work towards achieving”) is usually so boring-ly explained that it becomes hard to feel motivated at all.

Think of a goal this way:

Picture yourself in a version of the future in which you have something you deeply want.

Boom. That’s it. That’s your goal.

“That’s me benching 100kg.”
“That’s me looking good in my beach gear.”
“That’s me, but with double my income.”
“That’s me living in a house I 100% own.”
“That’s me playing the violin.”
“That’s me retiring by 55 without debt.”

“That’s me playing with my grandkids and not worrying where the next paycheck comes from.”

“That’s me sipping espresso on top of the Eiffel Tower.”

By creating a visual depiction of your goal – actually picturing yourself owning/having/doing the thing, you start wiring your brain to achieve it. This is called visualisation and is practised by top businesspeople and elite athletes – by picturing what they want to happen, they dramatically increase their chances of success.

SMART goal setting

The more you can define your goals, the more likely you will achieve them; you’ll have a clearer path, more focus and more motivation on your quest to your goal.

SMART goal setting was developed in 1981 by a team of academics seeking to help management teams improve operational efficiency. However, it’s become widely adopted outside of the business world and is an effective tool that provides the clarity, focus and motivation you need to achieve your goals. It can also improve your ability to reach them by encouraging you to define your objectives and set a completion date.

A SMART goal should be:

Specific: The goal should be clear and direct.

Measurable: You should have some criteria to know if you are progressing or have reached the goal.

Attainable: Make sure your goal is achievable within the timeframe.

Relevant: Your goal should align with your values and long-term objectives.

Time-bound: Your goal should have an “achieve-by” date.

A few examples of SMART goals:

“I’m going to lose 10kg [specific, measurable, attainable, relevant] in the next six months [time-bound].”

“I’m 35 now. By age 40 (time-bound), I want to have cleared another $100k [specific, measurable, attainable] off my mortgage, and have a 10-year plan in place for retirement [relevant].”

You get the idea.

Evidence of the effectiveness of goals

Don’t just take our word for it. Numerous examples and studies are highlighting the effectiveness of goal setting. One of the more famous, “The Harvard Study“, found that the 3% of MBA graduates who wrote down their goals ended up earning ten times as much as the other 97% put together, just ten years after graduation.

Similarly, research from a clinical psychologist in California shows that people who:

• who write down their goals
• share their goals with a friend
• and send weekly updates

were 33% more likely to achieve their goals.

Bottom line: have goals, write them down, and be accountable for them.

Why just having goals aren’t enough

The biggest problem with goals is that a goal is just the end result – it doesn’t tell you how to get there. That’s why it’s critical to create action steps.

Creating specific steps or actions you’ll take on the path to achieving your goal has numerous benefits:

• Gives you focus and direction
• Increases your commitment
• Increases your motivation
• Reduces fear of the unknown

Action steps should be like mini-goals that you can add to your daily, weekly and monthly to-do lists. The more bite-sized your action steps are, the better – you’ll be more motivated to achieve them and cross them off, helping you make more consistent progress.

Other steps you can take to make sure you’re progressing towards your goal include building accountability. This could take different forms, whether it’s by joining a group with similar interests/goals (e.g., a fitness boot camp or a writers’ exchange), by engaging with a mentor (a financial planner is a perfect example here), or simply by sharing your goals and plans with a friend and having regular check-ins. Suppose you’re serious about achieving your goals and not good at holding yourself accountable (few of us are). In that case, you need to outsource your accountability by having someone else act as your goal sponsor and helping you keep on track.

How a financial plan can help you achieve your goals

Everything we’ve just talked about above applies to financial planning. A financial plan is made up of 1) your goals, 2) your current circumstances, and 3) how to bridge the gap between the two (a.k.a, action steps).

And why do we believe a financial plan is the best form of goal setting? Because ultimately, everything comes down to money. Unless you live in a remote, barter-based community (unlikely, given you’re reading this online, using a device you probably purchased, right?), almost everything we do in life requires some form of financial commitment or capability. Even just taking your kids or grandkids to the park can easily include coffee, ice cream or snacks, let alone the bare necessities required for the trip like petrol, water, clothing, and so on.

Much like the under-education present in goal setting, Australians also struggle with financial literacy, with less than half of us able to answer basic financial questions correctly. Given how important a role money plays in our lives, this is a big cause for concern and one reason at Raeburn we feel so strongly about helping people achieve their goals. Many people are simply lost regarding their finances and don’t know how to find their way because they were never taught how.

The Five-Year Block Approach

Only one thing in life is certain – it ends. Morbid as this may sound, once you accept that you have a finite time on this earth, you can prioritise what is important to you. Want to climb a mountain? Learn the guitar? See 99 countries? Build a company for your children and grandchildren to inherit?

You can do all of this, but if you assume you have an infinite time-period in which to achieve it, you’ll do none of it. Instead, block out five-year “chunks” from now until the age of 80. Set goals for each of those chunks, and work towards them using a combination of SMART goal setting and action steps. Writing these goals down will give you your own structured bucket list or a roadmap of all the things yet to come. It should excite and inspire you – it’s your life, it should be worth being excited about!

Planning for Retirement

Retiring from work is a major milestone for all of us and one of the most common goals that we help people work towards. To help define your retirement goals, ask yourself these three questions:

When do you want to retire?

What does your ideal retirement look like?

How much money do you need to get there? (this one is harder to answer, and one we can help with)

Putting a plan in place

Our advice about financial planning, especially retirement planning, is that it’s always better to aim high than be conservative. Not only does this give you the best chances of smashing your targets, but if you do go off-track for whatever reason – even if you fall short – you’re still doing great because you set the bar higher in the first place.

Revisiting your goals and plans

A common mistake people make is that they treat their goals and plans as gospel or being carved in stone. While you should treat them with this seriousness, it’s also important to regularly revisit your goals to ensure they still align with what you want. People change, and so should their goals – so long as you’re still working towards achieving them and securing your future through happiness and wealth.

So, what’s important in your life? What do you want to do? What steps have you put in place to achieve those goals?

Whatever your goals are, we’re here to help. We take the stress out of planning your finances so that you can focus on the day to day of managing and enjoying your life. Book a free consultation, and let’s make a plan that’s right for you.

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.