Part of the initial discussions we have with new clients is obtaining an understanding of their goals. Some individuals are very goal oriented and others are not. For those who are not, we spend time educating new clients on the importance of communicating their goals — especially financial goals — with us. As a portfolio manager, it is essential, as it helps to establish recommended savings levels and investment suitability. Every client has a different set of goals and priorities and time horizon.
If you have never formally written your financial goals down on paper, we have a provided the following few steps to help you begin the process.
Create a list of financial goals
There are many different types of financial goals that we have heard over the years. Below are some of the more common financial goals we have noted and helped clients with:
• Reducing their overall portfolio risk
• Opportunities for potentially enhancing portfolio returns
• Ensuring adequate insurance coverage for family
• Being tax efficient
• Planning for a child’s or grandchild’s post-secondary education
• Creating a financial plan
• Better management of cash flows
• Buying a home
• Downsizing and decluttering
• Increasing annual income (i.e. new job, how to invest any changes to annual income)
• Balancing work and leisure (i.e. working less or smarter)
• Saving for a major purchase (i.e. boat, vehicle, home renovation)
• Creating liquidity
• Understanding your investments
• Managing and paying down debt
• Financial freedom
• Establishing an emergency reserve
• Preparing a budget
• Becoming financially independent
• Helping dependents
• Retiring
• Creating, selling, or buying a business
• Retirement savings
• Retiring comfortably
• Helping family or community
• Planned donation strategies
• Maximizing the value of your estate
• Income splitting strategies
• Estate planning for extended family planning
• Helping adult children
In order for this exercise to be valuable, your goals must be realistic. This list should focus primarily on those items requiring financial resources. Couples should discuss the goals together. We also prefer these discussions be done together in the office. We are always happy to provide strategies that couples can consider when establishing family financial goals.
Prioritize your goals
It is nearly impossible to work on all your goals at once
Once you have come up with your list of goals, next you need to prioritize them. From the list you both create, rank each goal in order, from most to least important. For couples, you can each complete this exercise independently, and then discuss together. Beside each goal, write any comments that you feel are important in helping your portfolio manager understand your total situation. The second step can often be a more difficult exercise for many.
Make them measurable
Most of your financial goals should be measurable.
By putting specific dollar amounts on your goals, you will be able to monitor your progress. As an example, if your goal is to be mortgage free in five years then your plan may involve setting aside the funds necessary to make extra principal payments each year.
Figure out your most urgent concern
From the list above, you should break your goals into short term (one to five years), medium term (six to 10 years), and long term (more than 10 years). Depending on your time horizon, short term for you may be one to two years, medium term three to five, and long term may be greater than five years. Adding a time frame to your goals can help motivate you to achieve them.
Talk to your portfolio manager
Once the above steps are completed, you should have a clearer understanding of your goals.
Are your goals reasonable? It is now time to share the work completed above with your portfolio manager for financial planning advice. The more “goals” you have, the more important it is to create a financial plan. Whether you have a formal plan or verbal discussions, we recommend outlining specific “actionable” steps. Without actionable steps, goals are just wishes.
Write your goals down, and review regularly
Often, it is said that if your goals are not written down then you are less likely to achieve them. Write your goals down and review them regularly. The goals can be written down informally or more formally within a financial plan which can help ensure you stay accountable to your goals.
Update and monitor your goals
You should review the progress you are making toward your financial goals at least annually. Keep in mind that your goals will be in various stages of development in the future, and that significant life events can often impact your financial goals. It is important to make your plan flexible and open to change. Over the years you will have hopefully reached many financial goals. It is important to set new goals and priorities as time goes on. Goals are necessary to motivate us and keep life stimulating. As life evolves, so may your goals.
Know that goals create happier clients
A common saying goes: “Without goals, and plans to reach them, you are like a ship that has set sail with no destination.” Whether our clients are working or retired, those that have set goals generally appear happier. It provides a reason for them to get up every morning and gives them a purpose to work toward.
Keep goals clear and focused
We have many diverse clients. What we have noted over the years is that financial success can be achieved, regardless of education level, if our clients have clear and focused goals.
Overcoming obstacles
Along your path to financial success and achieving your goals, you may be faced with obstacles. As a portfolio manager, we can meet with our clients and help them overcome such obstacles by providing solutions to ensure our clients achieve their family, lifestyle, and financial goals.
Achieving financial goals requires discipline and often means giving up something today to benefit you in the future. We feel that completing the process of establishing and prioritizing your goals will mean that you have started immediate action. This will make your goals more realistic to you, and increase the likelihood of them being reached.
Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director, wealth management, with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138. greenardgroup.com
