Published by Rob Furlong, Portfolio Manager
The alarm sounded promptly at 1a.m. Shortly after some rustling and grumbling the tent zippers opened and we stepped out into the frigid air. After a quick breakfast, we began heading uphill into the darkness. For the next eight hours life was little more than listening to the ice crunch with each step as we ascended over 5,000 feet into the thinning air. Shortly after 9a.m. we were at 14,200 feet-on top of one of the highest peaks in the Cascade mountain range.
This past June I had the opportunity to accompany colleagues on a climbing trip to Mount Shasta. The trip was one of many organized by Ron Carson over the past several years while working toward his goal to summit all 67 peaks in the continental United States over 14,000 feet. Each of us had our own goals for the trip as well. For some it was to hike above 14,000 feet or complete their first alpine climb.
For others it was simply an event on the calendar to force them to get, or stay, in shape. All ten members of our team summitted that day, and goal setting was a big reason why. Financial achievements are no different. Maybe you want to get out of debt. Maybe you want to retire at 50. Or, maybe you simply want to stash a couple extra hundred dollars away in an emergency fund. Whatever your priority is, it starts with setting a goal. Below are five important reasons for setting financial goals.
Reason #1: Goals Allow for the Creation of a Realistic Plan
Defining your goal allows you create a realistic plan to achieve it. Once the date for the Shasta climb was penciled onto my calendar, I knew I would have to incorporate long hikes with a 50lb pack into my weekly fitness routine. Continuing my usual regimen that includes mostly cycling wasn’t specific enough to help me achieve my goal of summitting Shasta. Financially, it’s exactly the same. If you want to retire with $1 million but you only have $100,000 saved, you need to create a plan to help you save more.
Reason #2: Goals Allow You to Track Your Progress
Progress is addictive. I knew the Shasta climb would require multiple 60-90 minute efforts gaining over a thousand feet. Each week when I set out on my training hike, I looked forward to trying to gain more vertical feet than the week before while carrying a heavier load. If your financial goal is to get out of debt, watching your debt balance shrink each month can be a great motivator to remain disciplined toward your goal.
Reason #3: Goals Force You to Prioritize
We are all busy. Between work, family, friends and any other personal hobbies, it sometimes seems impossible to balance it all. My goal of summitting Shasta forced me to prioritize my time to be able to fit in the necessary workouts before the trip. Most of us are pulled in several directions financially too. We want to save enough for retirement, or to salt away enough for college for our kids, or to make contributions to charities that mean a lot to us; all while balancing current bills. Unfortunately, most of the time we can’t do it all. Creating a financial goal forces you to prioritize near-term demands with long-term desires.
Reason #4: Goals Create Accountability
Every year I resolve to “get into better shape.” And, every year I start out with a bang and then fade around mid-February because this ambiguous declaration is not really a goal. Putting the Shasta climb on my calendar (and telling others of my plan) forced me to stick with my workouts to ensure I was in the proper shape. Squishy objectives like “save more for retirement” are very easy to give up on. Whereas something more specific like “save enough to purchase a home on the Oregon coast and stop working by age 55” is more useful. Establishing specific financial goals keep you focused and holds you accountable.
Reason #5: Goals Give You A Reason To Celebrate
Life is short. We could all use more moments to celebrate. At the end of our sixteen-hour day we ended up back at our bunkhouse in town celebrating our successful trek over pizza and beers. Even before achieving our final objective we took time to celebrate at the halfway point on the summit. Creating a financial goal and establishing milestones along the way gives you a reason to celebrate these moments along the journey.