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Time to reflect on your financial goals: The 1 key question to ask yourself

by Invisor Last updated on December 29, 2014 Tags: Save Well

It’s that time of the year when we revisit the goals we set for ourselves at the beginning of the year, think about what was accomplished (so we can celebrate it!), what worked well (so we can repeat it), and what did not work as expected (so we can change course and do things differently). As we do this, we also prepare to commit to our goals for 2015.

But have you assessed the areas where you tend to spend most of your time while you seek to accomplish your goals? Are those the right areas that you should be focusing on?

In other words, are you spending sufficient time in areas that matter to you the most?

To help with thinking through this question, let’s consider the following matrix to assess the areas where we spend our time. The horizontal axis represents complexity of the matter and the vertical axis represents the cost of an error or the long-term cost of a bad decision. You could use this matrix for any of your activities, but we have mapped some typical financial decisions or activities on this matrix.

Financial Decisions

You may notice, often we end up spending most of our time in the two lower quadrants where matters may or may not be complex, but the long term impact or the cost of making a bad decision is low. Typical examples of matters that fall in this category are planning a vacation, deciding on a TV/Internet/Cell Phone package that is most appropriate for you, organizing a party with your friends/family, etc. A bad decision in these areas may not have any material long-term impact on you.

But do you spend sufficient time in the two upper quadrants – especially the top right quadrant, where matters are complex and the long term cost of a bad decision is significantly high?

One of the key items that would fall in the top right quadrant is your financial plan – a plan to have a comfortable retirement, a plan to accomplish your children’s education funding, and/or a plan to ensure you and your family are sufficiently protected from any unexpected events that could impact your life. A bad decision or an indecision today could have a significant impact on you and your family in the long term. Yet, many people spend little time in this quadrant ‘hoping’ that the future will turn out to be rosy and wonderful. Certainly a nice wish to make, but a wish with no specific plan of action will likely remain a wish forever!

If you think you are not spending sufficient time in the top-right quadrant of the matrix, you should plan to do so immediately and craft that into your goals for 2015. Often it’s the complexity of the matter that leads people to procrastinate. If you need help, seek it. Consider it a priority and take action.

As Maria Robinson famously said “Nobody can go back and start a new beginning, but anyone can start today and make a new ending.”

In other words, it’s never too late to get started. Act now!

Happy holidays and have a wonderful 2015 accomplishing all your goals! We will connect again in the New Year.

 

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