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News Bulletin : ADA News Bulletin September 2011
40 SePtember 2011 business perspectives From a financial perspective, goals provide context for making financial decisions. For example, if one of your goals is to have $3 million of equity (asset value less debt) in your share or property investment portfolio in say 10 years and you do not yet hold any investments, well it gives you a sense of urgency and you know you should start investing soon. It is impossible to develop an investment strategy without first setting goals. It’s a little bit like asking for driving directions without disclosing a destination. HOW TO SET GOALS The best way to start setting goals is to identify what gives you the most satisfaction. What does your perfect life look like? What are you passionate about doing? Then move onto the ‘why’... why are these things important? How do these things make you feel? How would you feel without these things? Once you have identified some key desires you want to achieve in your life you need to identify the things you need in order to achieve them. Is it better health, passive income, more job flexibility and so on? These will become your goals. You may have heard of the acronym SMART goals, but just to recap, all goals should be: Shared – often this first point stands for ‘specific’ – that is, be specific about what the goal is. However, I like ‘shared’ better. Sharing a goal with another person almost forces you to follow through with it. It makes it more ‘real’. Measurable – the more measurable, the better. Wherever possible, the goal should include a number, dollar value, percentage or something like that. If your goal is, for example, achieving more personal time, then maybe the measure can be that you play a minimum of three games of golf per month. Attainable – the goal must be attainable. It’s great to stretch yourself but if its not really attainable then you set yourself up to fail. Realistic – be realistic about your goals. For example, if you set a goal of eliminating all discretionary spending (knowing that you love to shop for new clothes) it’s probably not realistic. Better to set a goal to reduce spending rather than totally eliminate it. Time-based – set yourself a deadline. Specific dates work best – rather than a month or year. The clearer a goal, the more achievable and powerful it will be. You need to be as descriptive as possible as this makes the goal clearer and easier to visualise and get excited about. Compare these two examples of the same goal: • An investment portfolio producing $50,000 of income in ten years. • An investment portfolio comprising one residential investment property in Elwood, Melbourne worth $1.1 million and an ASX20 index fund investment with Blackrock worth $750,000 with total debt of $300,000 producing $50,000 of net income by December 2021. The second example is much clearer and as a consequence, appears more realistic. IT’S THE START THAT STOPS MOST PEOPLE From my own experience, goal setting can be a time consuming process. However, don’t think that you need to achieve it all in one session. Just making a start and putting pen to paper is the most important thing. Maybe your first goal should be to complete or finalise your goals over the next six months. Work on them each week. Give yourself time to think and reflect. Once you get started you’ll feel the benefits of goal setting and it’s more likely you’ll continue with the process...it’s the start that stops most people. My business coach has taught me many valuable lessons – here are two important and relevant ones. Firstly, start with the end in mind, i.e., determine what you want to achieve before diving into something. Secondly, spend more of your time focusing on the ‘why’ and ‘what’ then the ‘how’ will appear. This second lesson seemed a bit airy fairy initially, but the point of this is once you have very good clarity about what you want, when you want it and why, the ‘how to get it’ will be more obvious. Therefore, if you want financial freedom, focus on what financial freedom means to you and why it’s important. Once you understand this, how to achieve financial freedom will become clearer. I CHALLEnGE YOU! My challenge to you is to send me an email and tell me what date you’ll have your goals on paper. I’ll email you on that date and hold you accountable for achieving this. This is your first opportunity to start the goal setting process. It really won’t take long – just think of a date and drop me an email. Stuart Wemyss is a qualified chartered accountant, financial planner and mortgage broker. Stuart founded financial advisory firm ProSolution Private Clients which helps dentists maximise their net worth by providing financial and mortgage advice. Contact: email@example.com “Once you get started you’ll feel the benefits of goal setting and it’s more likely you’ll continue with the process...it’s the start that stops most people.”
ADA News Bulletin August 2011
ADA News Bulletin October 2011