Don't Wander Without a Map: Defining SMART Financial Goals

My intention was to write a blog about the value that financial advisors provide for their

clients. As I completed the outline, I realized that maybe I had just set up a book rather than a blog, so I decided to focus on a singular element. In this case it seems the best place to start is at the beginning.

Defining Goals – Let’s Make Them Real

I don’t know how many different times throughout my career I have been taught about

the importance of setting goals, and more importantly - how to set goals. In 1981,

George T. Doran wrote an article for the Journal of Management Review, entitled,

There’s a SMART Way to Write Management’s Goals and Objectives. In the article, he

outlines the “SMART” way, and over the years, it has been changed and adapted so many times that it’s seems like everyone has some variation in how it is presented. While the words used have changed over the years, the overall message is the same, and this is the way I learned.

Specific – Don’t Be Vague

Saying you want to retire with a similar lifestyle that you live now is not enough, it’s important to hammer down what that means. A good financial advisor can help to quantify what “a similar lifestyle” looks like. You cannot measure goals that aren’t specific.

Measurable – Define Your Success

Your financial advisor will have a multitude of ways to track and measure your financial journey, but we need to start with what to measure. We can do this by breaking up our goals and establishing benchmarks and milestones. Through regular meetings with your advisor, you can revisit each goal and adjust as needed.

Achievable – Keep it Realistic

Keeping your goals grounded in reality is critical to their success. Setting a goal of competing with SpaceX is probably best left to Jeff Bezos. Now, that is not to say that you shouldn’t be shooting for the stars… just keep it on planet Earth. You need to find the sweet spot that pushes towards something great, but not so far that you can’t actually achieve it.

Relevant – Make it Make Sense

It’s probably not relevant to tell your financial advisor that your goal is to take a shower every day. You might need to see a different professional for help with that. Goals change throughout your life. What you find important today, may not be important tomorrow, or more appropriately, what you find important tomorrow, might not be something you are thinking about today. A good financial advisor will help you recognize goals that you haven’t yet considered but still need to be discussed.

Time Bound – Transform Intention into Action

You need to set deadlines. Sometimes, we decide when we want to accomplish a goal, other times it is decided for us. We don’t strive to pay for our children’s education by the time they reach 40, we strive to pay for it when it needs to be paid. Whether they are defined for you or you decide yourself, goals must be bound to time - there needs to be a finish line. This will help you prioritize your goals, and this will make regular review an easier process.

The Sherwood Difference

If accomplishing your financial goals is the checkered flag, setting them is the starting line. If your financial advisor hasn’t had a conversation with you about your goals – THEY ARE DOING IT WRONG.

Every time this conversation comes up, I’m reminded of the Cheshire Cat from Alice in Wonderland - When Alice comes upon a fork in the road, she sees the Cheshire Cat in a tree. She asks the cat, “Would you tell me, please, which way I ought to go from here?” The Cheshire Cat responds, “That depends a good deal on where you want to get to.” Alice tells the cat, “I don’t much care where.” To which the cat tells her, “Then it doesn’t much matter which way you go.” Trying to develop an effective financial plan without knowing the desired destination makes it impossible to choose the right path.

A good advisor will help you find where you want to go and then walk beside you along the way.