We live in one of the most amazing eras in human history. Never before have so many people enjoyed the degree of wealth and opportunity that we enjoy now. Think for a moment about the simple things that you and I take for granted more often than not.
- I press the button on my iPod and I instantly enjoy great performances of great music from some of the greatest artists in the world.
- Through my internet browser I have instant access to a vast library of ideas.
- I turn the ignition in my car and I engage more horsepower than a small army would have possessed just two centuries ago.
- My health is better than past generations would have enjoyed.
- My expected longevity is greater than past generations.
The great paradox of our day is that despite the tremendous blessings of our modern age, the degree of human unhappiness in the world seems to mount steadily higher. It almost seems like the more we have, the more elusive a basic sense of well-being becomes. For many people, the economic debacle of the past twenty months has dramatically underscored their gnawing sense of vulnerability. In many respects, our age is a clear demonstration that improvements in our environment do not automatically improve our satisfaction.
To bring this point a little closer to home, take a moment to reflect on some personal questions:
- Do you have as much happiness in your life as you once hoped to find?
- Is your life infused with a personal sense of well-being?
- Are your financial habits leading you where you really want to go?
- Do you know what matters most to you?
- Are your financial goals consistent with your values?
If you don't like your answers to these questions, you aren't alone. Many people I encounter in my profession have a basic sense of unease about their financial lives. The good news--and the point of this post--is that if you don't like your answers, you can change them. I want to invite you to get SMARTER about your life by setting SMARTER goals. As you do, you will discover a greater sense of direction in your life and greater sense of well-being.
You may have heard of SMART goals before. I came across this concept a few years ago while doing some planning for a church assignment I had. My friend, a human resources professional in a leading technology firm, encouraged me to set goals that were SMART. My puzzled look told him I needed some further instruction so he told me that SMART is an acronym that stands for:
S = Specific - Answers to the questions who, what, and how are readily apparent.
M = Measurable - Progress can be objectively measured for all to see.
A = Acheivable - The necessary resources are available.
R = Realistic - The goal, though a stretch, is within reach.
T = Time-based - There is a clear deadline.
Goals that are SMART, he informed me, are powerful because they have all the elements necessary to fully mobilize an organization or individual. Because they are specific, everybody is clear about what they are trying to accomplish and who is responsible. Because they are measurable, progress can be clearly marked for all to see. And because they are achievable, realistic and time-based, they are motivating. I liked the concept and I have found it to be very helpful both personally and professionally.
Financial goals - A need to get SMARTER
In my work to help individuals and families get their financial lives in harmony with their core values, I have discovered that financial goals don't only need to be SMART, they need to be SMARTER. A SMARTER goal follows the five principles from a SMART goal but adds two more:
E = Evaluate - Because financial goals are very long term, they should be reviewed periodically to make sure they still comply with the first five principles. In the case of wealthy families, financial goals often span generations. As financial conditions change and given the inevitable ebb and flow of life's events, financial goals should be evaluated from time to time by asking the following questions:
- What is the likelihood that my goals are still attainable?
- Is my initial time frame still reasonable?
- Are my current risk boundaries still appropriate?
- Is my strategy sufficient to achieve the goal?
- Are modifications necessary to my goal?
R = Risk aware - Boundaries need to be placed regarding the risk you are willing to acceptable in pursuing your financial goals. Without these intentionally set boundaries, the level of risk in your financial life can creep up on you and you may not be aware of it until it is too late. As you think about making your goals risk-aware, a clear philosophical foundation for your thinking about risk is vital. This foundation will help you determine answers to the critical questions: How much risk is appropriate? Which types of risks should I take? And, perhaps more importantly, which types of risk should I eliminate. For example, the work I do with clients, is always based on three core principles:
Take the least amount of risk necessary.
Take only risks the market pays you to take.
Make sure you actually get paid for the risks you take.
A good advisor can help
Setting SMARTER financial goals is not a simple process. A good advisory team, well-versed in advanced analytical techniques, can be an invaluable resource to you. In my next post, I will show you how to find a good advisory team. In the meantime, think about this: If you want SMARTER financial goals, shouldn't your financial team be smarter, too?