This week marks the start of the FIFA Women’s World Cup. Whether you’re a sports fan or not, there’s no denying the power of using goals in sport. But did you know that using the right goals can help you build your wealth too? Let’s look at the benefit of setting focused goals with the support of your financial planner.
Research by Morningstar found that using a goals-based framework in financial planning led to an increase of wealth of more than 15%. Many people, however, tend to think of top-of-the-mind goals, influenced by behavioural biases. When people detach emotion from goals, objectives can become basic and standardised, causing ‘blind spots’ that hide true goals.
Morningstar’s research shows that without proper guidance, people often fail to identify important goals that should be a central part of their plan. So, how can you delve deeper and choose more meaningful and achievable goals that won’t create barriers to your success?
Choosing meaningful goals
We all have some sort of behavioural bias. Often, when people are asked to look at their financial goals, biases can arise for a variety of reasons. Personal goals can evoke a deep emotional response. Important decisions might feel overwhelmingly difficult and complex. For many people, it can be hard to try and forecast their future aims and aspirations.
When you are put on the spot by your financial planner, a top-of-the-mind goal might emerge first. For example, imagine you have recently attended a party or celebration at someone’s home. You were impressed with your friend’s home, so you might respond by saying your number one goal is to buy a house. It’s a knee-jerk response that may hold some truth, but the real underlying and overall goal might be very different.
There are lots of different ways to set goals. Some people suggest making lists, while others might suggest visual activities, such as mood boards, to aid people’s thinking. Morningstar discovered that when people worked through a “master list” of goals, this generated more accurate results. Weighing up different objectives can help you determine your true goals.
How to prioritise your goals
As an example, here’s a mini exercise based on Morningstar’s study.
First, think of the three financial goals that you feel are the most important to your life.
Next, look at the 10 master goals below. Tick all the ones that apply to you:
- To pay for care fees and possible medical expenses
- To start a new business, venture or side-hustle
- To buy a house or a second property
- To support my children’s education
- To stop working and retire early
- To go on a dream holiday
- To care for aging parents
- To feel financially secure
- To relocate after retiring
- To leave an inheritance
Lastly, from the ones you have listed, shortlist the three master goals that you feel are the most important to you. Are these goals the same as your original three or are they different?
This is just a sample exercise; there are other goals you could consider too. If you need help with goal planning, speak to your financial planner.
“On average, 26% of participants changed their top goal after seeing the master list… About 73% of participants substituted at least one of their top three goals with goals from the master list.”
Mining for Goals, Morningstar
Goal-based planning
Overall, Morningstar found that the people they studied tended to prioritise “personalised, detailed, and emotionally grounded” goals. How do you decide your financial goals? Through our financial planning process, we can take you on a similar journey.
Our financial planners will talk through your aims and aspirations by getting to know you and what really matters to you. Once we understand your values and views on your current lifestyle and future retirement, we can draw up some clear goals for your financial plan. A focused financial plan with relevant and achievable goals is the key to building your wealth.
Do you need help with goal planning? Get in touch with our financial planning team to create a financial plan that reflects your true aims and aspirations.
Sources:
https://www.fifa.com/fifaplus/en/tournaments/womens/womensworldcup/australia-new-zealand2023
