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Asking Why: The Purpose Behind your Financial Goals

I’ve mentioned before how losing weight is similar to saving money. Before I went on my weight loss journey I had to ask myself why it was I wanted to lose weight. Was it to get healthier? To fit into my clothes better? To feel more confident? To live longer? It wasn’t until I considered the reason for losing weight that I had any chance of success.

As I got on a food and exercise plan, I often reflected on the reasons why I wanted to lose weight. It helped during the days I didn’t feel like getting up to run or wanted to eat a second helping of a favourite food.

I was tired of feeling tired all the time. I was tired of carrying around extra body weight and being out of breath running up the stairs. I was tired of feeling exhuasted by nine o’clock at night. When I reallly thought about it, I realized I wanted to lose weight to have more energy. Once I knew why, the journey was a whole lot easier. When the going got tough, I knew there was a reason I was working so hard.

For those of us with financial goals, we need to understand the reason behind our goal if we hope to have the stamina to reach our destination. Why do you want to reach your financial goal? Is it to buy things that are important to you? To have enough to last until your old age? To leave a substantial amount of money for your children or favourite charity? To retire early? To buy a cottage, a boat and a Lamborghini? Or is it simply for the purpose of setting and reaching a goal?

There are no right or wrong answers. What matters is that you know your reason why. When you know the purpose behind your financial goals, reaching them is a whole lot easier.

You may be surprised at your own answers. I was.

Get out a piece of paper or open a document file. Print at the top:

My financial goal is ___________________.

These are the reasons I want to reach my goal…

Write as much as you can. Once you finish, read over your list and identify any themes

Here is my list.

My financial goal is ___________ in cash and investments by age 60.

Why do I want to reach this goal?

  • I don’t have a pension.
  • I don’t want my kids supporting me.
  • I don’t want to have to depend on others to financially support me.
  • I don’t want to worry about money / paying the bills.
  • I want to be able to travel.
  • I want to have enough to last until I die.
  • I don’t want to lose my house.
  • I’d like to buy a cottage on the water.
  • I fear ending up on the streets.
  • I don’t want to have to use the food bank.
  • I want to have the freedom to make choices.

When I reflected on my list, I realized the purpose behind my financial goal boiled down to security. Having money makes me feel secure. For me, knowing that security is the ultimate goal helps me to make smaller financial choices along the way. I avoid debt. I don’t have any leveraged loans or lines of credit. We pay off the credit card in full every month. We pay cash for cars.

My spouse and I have a good amount of life insurance and disability insurance. We have a healthy emergency fund. We have a balanced couch potato portfolio, invest monthly and automatically. In truth, it’s quite boring. Yet it gives me a great deal of peace of mind and comfort knowing that with each financial decision I make, I’m becoming more financially secure.

What are the real reasons behind your financial goals?

Kathryn works in public relations and training for a non profit. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Her passions include personal finance and adult education. Kathryn, along with her husband and two children live in Ontario.

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About the author: Kathryn has been a staff writer for MDJ since January 2009. During the day she works in an office. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Kathryn, along with her husband and two children live in Ontario.

{ 21 comments… add one }
  • Andy August 6, 2009, 9:49 am

    Thanks Kathryn for this Post, Its Really Nice Post…

  • Four Pillars August 6, 2009, 10:22 am

    My main financial goal is to become more financially independent. By paying off my mortgage, working towards maxing my rrsp, minimizing lifestyle inflation and having different income streams helps with that goal.

  • Kevin Beitel August 6, 2009, 10:58 am

    The security behind having sufficient funds reduces the stress in trying to provide for my family….

  • DividendMan August 6, 2009, 11:13 am

    My financial goal is to have enough passive income so I don’t have to 9-5 to survive.

  • Michael - Fat Loss Tips August 6, 2009, 11:39 am

    Kathryn, very thoughtful post.

    This may be a stupid question that has been answered in other posts but I have to ask it:

    Will a financial adviser ever suggest the “couch potato strategy” as a viable option?

    If they do, are they just shooting themselves in the foot b/c they are missing out on your money?

    As a financial coach I’m sure you’ve probably been asked this question. Thanks in advance…

    P.S. Your potato link does not work :)

  • Dave August 6, 2009, 11:48 am

    My own financial goals are based around freedom: to do what I want, and not worry about an obligation to an employer or colleagues. I think that’s a lot like staying in shape, as well: you’re not constrained by fitness, and have the energy to do things you otherwise wouldn’t.

    I like the security as well, and that’s why I tend toward a conservative passive investing approach. The Couch Potato is the way to go!

  • Kathryn August 6, 2009, 12:04 pm

    Michael:

    Great question. There is no reason a fee based financial advisor would ever suggest a couch potato strategy. The fees are too low. One of my pet peeves about the financial industry is that financial advisors make money off their clients investments. It’s a conflict of interest when their goal is to get people to sign up for (high fee) investments rather than considering the overall goals / financial security of their clients.

  • cannon_fodder August 6, 2009, 12:09 pm

    Kathryn,

    Perhaps it is semantics, but wouldn’t a fee based financial advisor who you simply pay for their time (e.g. review your entire financial statements and provides a report for a flat fee either based on time or the value of your investments) be amenable to recommend something that is not a conflict of interest?

  • Kathryn August 6, 2009, 12:16 pm

    CF: You’re right. As soon as my time limit to edit ran out I realized my mistake. I meant the type that get paid per investment rather than fee based. A fee based advisor is the better kind to use to avoid a conflict of interest.

    Is there a name for the non-fee based financial advisor?

  • Four Pillars August 6, 2009, 12:29 pm

    Commission based financial advisor?

  • Kathryn August 6, 2009, 12:47 pm

    FP: Yes, that’s it. Clearly someone served me decaf this morning.

    A commission based financial advisor would have no reason to suggest a couch potato portfolio.

  • craig August 6, 2009, 1:10 pm

    You have to have a purpose behind your savings and ask yourself the basic questions. This way you can keep organized, set a plan and keep yourself motivated to achieve your goals.

  • Adam August 6, 2009, 1:18 pm

    Funny, I seem to be in a different place these days. Once I trimmed the financial fat from my life and got on a path of saving, I found that I started to feel a slave to these things. I gave myself an incredibly hard time for straying even a touch, over using my cell phone etc.

    What I have discovered is that I was also motivated by the security this path will build, but I have also found I am trading some happiness for that. I don’t love my job, at all, it pays very well which is the other problem… I start to feel afraid of making a leap in fear of falling of my finacial path.

    A post about striking a balance would be a great topic. Are some of you feeling like you have your wings pinned down in order to stay the financial course at the sacrifice of some happiness?

  • AK August 6, 2009, 1:53 pm

    Adam: You should check out Kathryn’s post from July 16th-Financial Regrets, it was really helpful in bringing to light the importance of balance, and just letting loose (sometimes!)

  • Michael - Fat Loss Tips August 6, 2009, 4:20 pm

    @Kathryn et al,

    Thanks for the answer. I suspected as much.

    Not sure if this has been covered here at MDJ but a “how to convert to a potato/index style of investing from traditional MFs” would be interesting.

    It can seem like a daunting task when your portfolio includes leveraging, RRSPs, labour-sponsored funds, and other details.

  • Ms Save Money August 6, 2009, 5:52 pm

    Agree – there is always a reason why we strive for different goals.

    AK – I remember that post – It was definitely a good post.

  • Mark in Nepean August 6, 2009, 10:29 pm

    Good post.

    My financial goals are as follows:
    1) own our home in 15 years.
    2) contribute $5,000 to RRSPs each year, for the next 20 years.
    3) try to (always) hold $10,000 in an emergency fund.
    4) save $5,000 to travel to europe, other countries each year.

    It’s all about balance. Life is short, you could be gone tomorrow….

    On the topic of the couch potato strategy – no commission-based FA would promote that. Besides, if you know abou this strategy, why are you going to an FA in the first place???

    Cheers!

  • Him August 6, 2009, 10:42 pm

    Your couch potato portfolio link doesn’t work! Please fix it!

  • Mike August 8, 2009, 2:51 pm

    Just a tip… I remember reading somewhere that one should not use the word “don’t” or other negatives in a goal statement. For example, “I don’t have a pension” could be “I want to have a good pension”. Apparently it helps the psychology behind the goal, turning it from being fear-driven in to an aspiration.

  • used tires August 8, 2009, 3:25 pm

    My financial goal is to able to live comfortably, and by my own means, and to live the type of life style that I want. As far as a reason… it’s hard to explain since I am still young, so I will say this…. so I don’t have to worry about whether I will have enough money to do the things I want to do.

    Till then,

    Jean

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