Imagine that you walk into your workplace to find that your boss hasn’t shown up again. It’s been that way for two weeks now, and it’s not just your boss – every manager in the building has suddenly and mysteriously disappeared (try not to pump your fist here). There’ve been no emails coming in from the corporate office, no phone calls from the CEO. Employees speculate at first that there must have been a leadership retreat that management failed to tell them about. But by the start of week two, even that theory is discarded.
What do the employees do? A few of them keep their nose to the grindstone out of habit or sense of duty. Some stay in the office during their set hours, but their work begins to slip, and some are seen reading magazines in their former bosses’ corner offices. Others organize large group lunches that last 2-3 hours. One bold employee simply stops showing up. In time, even the employees that continue to work cannot do so with any effectiveness, because without direction, it’s unclear what they should even be focusing their attention on.
Now imagine that each of these employees is not a person but some amount of your money, sitting at a desk performing work. This is not such a ridiculous metaphor. Your dollars really are your employees, and they work for you. They work to keep you fed and sheltered. They grow in investments and eventually relieve you from having to work at all, if you plan it right. You are the CEO these employees, but all too often you are not an effective leader them. You allow your money to slack off, bringing unnecessary luxuries into the office while more important jobs, such as retirement saving, go undone. You say to your employees, “I’m not sure what this company’s mission is, so just hang out in this savings account for a while and I’ll totally get back to you.”
Fortunately, you have what you need to turn the company around: clearly thought out goals. That’s it, I promise. Taking a few minutes to write out short term and long term goals is one of the strongest steps you can take toward putting your finances in order.
Goals are like the middle managers of your financial life. They ensure that money is being allocated correctly and that short and long-term needs are being met. They are bean counters in the best sense of the word, because they hold you accountable. If you write down, “I’d like a new deck in my back yard within 5 years” and put it on your fridge, something interesting happens. It becomes real. You’ll ask, “How much will this cost?” and “How much can I save for this per month?” From these questions come answers, and these answers lead to direct action. Friends and family will see these goals on the fridge and ask about them, which will make you feel accountable to your goal. Then, when you’re at that expensive restaurant with your friends, you keep your bill reasonable, because now understand what you have to gain by doing so.
As an exercise, write out one 1-year goal, one 5-year goal, and one 20-year goal. If one of them is some form of “retire by age X”, dig a bit deeper. What do you want this retirement to look like? How much would it cost? The answers to these questions will help you develop your plan of action. Without it you’re just blindly piling up money, hoping it will support a lifestyle you haven’t even defined.
Set these goals loose in your office. They will crack the whip. They’ll rally your employees. And hopefully, they’ll keep your business profitable for years to come.
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