When I started working at BNR and then Nortel, there was always a “goal” for the company. That goal was Vision 2000. This goal was that Nortel would be the #1 Telephone equipment sales company in the world. Nortel achieved that Goal. However, the Goal no longer mattered by the time 2000 rolled around. The Internet and Wireless phones circumvented the business of selling phone switches and how all this worked together.
This is why you must set your Financial Goals, but you also, every once in a while, do a “sanity check” on the Goals themselves. You need to decide whether they are still relevant.
Say you had children and a plan with RESPs, but then your child was diagnosed with a disability. Your goals may no longer be relevant. You can change your goals and react to the change. This happened to me.
Although I am not quite sure what my financial plan was then, it now includes an RDSP . Saving for my child’s future as a disabled Canadian is now a primary goal.
If you suddenly got a windfall of money from an inheritance or a bonus, it is obvious that your plans are no longer up to snuff (unless you planned for that, in which case, good planning!). When you end up “in the money”, don’t just squander it and then have to make up other plans (like what to do when you are out of bankruptcy), rethink and re-jig your dreams or expand your goals.
Say one of your goals was to have $2 Million saved for your retirement by age 55. However, over time you also built up a substantial amount of discretionary debt, which will not be paid off by the time you reach age 55. This means your retirement savings Goal is now irrelevant. If you reach your goal of having $2 Million in savings, but you are carrying $300,000 in mortgage and debt by that age, your dream has not been achieved, has it? Stop saving, kill the debt and then get back to your plan.
All plans need to be tended to often to ensure you are chasing the right brass ring. Ensuring that the brass ring is still there and that you still want to have it, is the thing to remember.
Doing a sanity check once in a while can help make your financial goals realistic. One good example is checking your loan documents and making sure that your were not victimized by the misleading Payment Protection Insurance appended to your loan.
Ah, this brings back memories. I remember Ben Schmidt’s comment on Vision 2000: 2000 parking spaces in 2000. Scary on how close he was…..
I like to re-evaluate my vision once a year, usually early in the New Year. It is time for reflection and action. I look at my financial returns once a quarter and that is sufficient for a year end projection.
I think you also need a ‘plan’ to get there. Lot’s of people have goals but no ice how to achieve them.
Just my 2 cents…. cheers, rob…
It’s probably a good idea to revise your goals if your income improves, too. It’s much easier to save $10 000 a year if you’re making $85 000 a year than if you’re making $45 000 a year. Yet somehow some people don’t revise their savings goals upwards when they start taking more money home.
If it’s possible to lie to yourself about your increased earnings and stay spending at the level you were at with your former income and save the rest, that 2 000 000 at 55 (or 65) becomes much more achievable.