A huge amount of research has already convincingly proved that to achieve financial success it is extremely important to correctly formulate the goal. It's like a trip: you will reach your destination much faster if you know exactly where you are going, otherwise you will just wander aimlessly.
If you can even enjoy such activities while traveling, in the financial sector the lack of a goal will not lead to anything good. But the presence of a goal is also not enough. For you to achieve it exactly, it must be formulated correctly, you can’t just strive to be rich or someday retire.
In 2007, a blogger named Pigno set himself the goal of creating an investment portfolio worth $ 1 million by 2017. He shared how he formulated his goal and how he went towards it.
Goal Setting Rules
Pinho did not invent anything new here, he used SMART technology. In this abbreviation, all the main criteria are encrypted, which allow us to formulate a high-quality goal, the chances of achieving such a goal are as high as possible. Let's look at each criterion in more detail.
Specific
It is extremely important to formulate your goal very specifically so that you can constantly monitor and measure your progress, report to yourself or your mentor. For example, instead of saying that you want to get rich, you can say that you want to have a capital of $ 1 million in 10 years.
Measurable
It is necessary that the goal can be measured in some units. For example, being rich is an immeasurable concept, and a million in 10 years is a very measurable one.
Achievable
Reachability here does not mean how realistic your goal seems to you, but that it can be broken down into specific small steps that you will be able to perform. Suppose, in order to get a million, you need to perform quite specific and understandable actions: increase revenues, reduce costs, invest, keep records and so on.
Realistic
The SMART methodology assumes that the goal should be for you to the extent possible. But with a person who begins to move stubbornly in the chosen direction, very often magical things begin to happen. For example, when Jeff Bezos was just starting work on Amazon, it was unlikely that even in his wildest dreams he would assume that he would become one of the richest people on the planet. For him, at the beginning of the journey, this goal was completely unrealistic, but as he moved forward, everything changed. Therefore, dream more boldly: it’s boring to pursue small goals, even though it seems fantastic to you now, but not so much time will pass, and you will see that everything is completely within the limits of the possible.
Time determined
It is unlikely that you want to get a million ever, for sure you want to get it in the foreseeable future. Therefore, be sure to indicate the period by which time you plan to have what you want. For example, getting a million in 10 years is a great goal.
Pigno example: how he worked on his goal statement
“Before I started blogging in 2007, I did not have good financial goals,” the blogger shares his experience. “I just wanted to be rich.” But what is being rich? After reading several books, I determined for myself that the rich is when the income from all my assets can fully cover all the basic expenses of my family, and also remains a little on luxury goods.It was a good start, but then I started working with my goal on SMART technology. "
So, the goal of Pigno is to form an investment portfolio of $ 1 million by 2017.
This goal was specific. It was measurable - at any time you could open the program and see the size of the portfolio and its condition. It was achievable: Pinho calculated that he needed to save and invest $ 20,000 each year. The goal was realistic: the blogger did not expect to receive sky-high interest on his investments, he calculated quite reasonable profit in the amount of 10 percent per annum. And the goal was determined in time: the blogger wanted to achieve it by 2017.
At the beginning of work on the goal, he had already saved an amount of $ 230,000, so Pinho was optimistic. For his calculations, he built a simple table in "Excel" and made sure that the numbers converge.
“If you are curious if my wife and I were able to achieve what we planned, then I can tell you,” says Pinho. - We have formed a capital of 1 million dollars, but not by 2017, but somewhat later. The 2008 financial crisis was serious, and this seriously affected our initial plan. ”
Set priorities and act in accordance with your goals
Once you have completed your goal statement, the next step will be prioritization. Of course, I would like to look into the future with optimism, but sometimes life makes its own adjustments. Therefore, it is important to have a system of priorities on hand to understand how to act when a situation becomes critical.
Here is an example of how priorities can be correctly set:
- Basic needs. They are always in the first place, since it is extremely difficult to survive without food and a roof over your head. The good news is that most families do not live on the brink of survival, but they can afford much more, so they have the opportunity to reduce costs to achieve large financial goals.
- Amortization. Most people have debts, at least, for example, a mortgage. And this is the second priority.
- Retirement Savings. This should be the next important goal for those people who do not want to lose their quality of life after they stop working.
- Savings for the acquisition of real estate. If you do not yet have your own home, then this can be a good long-term goal, but not necessary. It is quite acceptable that you prefer to rent a house, and use the money saved to form investment capital.
- Other financial goals and desires. If you dream of some major purchases or want to spend your vacation in warm countries, then all this you can put in this group.
Accordingly, if a crisis occurs, then in the reverse order you begin to abandon your goals, thus redistributing money in favor of the most significant.
Do not take the time to carefully think through, formulate and calculate your goals, this step will greatly simplify your further work and accelerate the achievement of what you want. But stuck at this step for a long time, too immersed in planning, is also not worth it. Even the most competent and correctly formulated goals will remain only written on paper, unless you start to take concrete steps to achieve them. Good luck on this fascinating journey!