What is the first thing you do when you want to watch a movie? If you’re a normal person what you will do is decide what movie to watch and choose where to watch it and at what time. It’s the same thing with wealth building; you have to know first what you really want before you move on to the next steps. Most financial planners will tell you to examine your present financial situation first before you think about what you want to accomplish. I would agree with this if building wealth is as simple as watching a movie. After all, how can you watch a movie if you do not have money? However, wealth building is a much more complex and bigger undertaking.

The biggest advantage of setting your goals first before determining your present condition is that you are free to dream as you please and you can dream big. You can let your imagination fly and dream of the things that you really want in life without thinking about how much it will cost. If you know how much (or more appropriately, how little) money you have now, your tendency will be to scale down your goals.

Anyone can talk about their dreams and aspirations in life. But setting goals is more than just making general statements, like “I want to have my own house” or “I want to be rich.” Building wealth will be nothing more than just a daydream if you don’t know exactly what you are trying to achieve. You need to have clearly defined goals so you can focus your efforts in making your dreams come true. When you set goals keep in mind that these should be SMART to be effective, meaning Specific, Measurable, Achievable, Realistic and Time-bound.

Specific

When you dream about something, you imagine how exactly it’s going to look or how it’s going to happen. You are more likely to pursue goals that you can easily imagine or picture in your mind compared to those that are vague or fuzzy. If you have a clear idea of what you really want, you will be more inspired to do everything necessary to accomplish it.

Instead of simply saying “I want to have a big house” describe in detail what kind of house you want. You could say for instance, “I will build on a 1,000 square meter lot a 2-storey house with 5 bedrooms, 3 bathrooms, a spacious living room with high ceiling and a dining area with a nice view of the garden.” The more specific and detailed your goal, the easier it will be for you to imagine and you will be more excited and passionate to turn it to reality.

Measurable

Goals should be measurable so that it will be easier for you to determine if you have hit your target. “I want to get rich” is not a smart goal because it is hard to measure. How will you know if you have already made it? What amount do you think you need to have to consider yourself rich? Instead, set how much exactly you want to accumulate. For example, “I want to accumulate P10 million before I reach 65.”

Measurable goals also allow you to break it down into smaller tasks and help you monitor your progress so you can take the necessary steps to get back on track, if needed. All financial goals should specify an exact or estimated amount. If it’s a house or car you want, include how much it will cost.

Achievable / Action-oriented

Don’t set-up yourself to fail by creating goals that are extremely hard. You don’t want to spend all your life chasing something that you will probably never reach. But don’t make very simple goals either, which you can get done with little effort. Instead, aim for something hard to accomplish but achievable as long as you put some effort into it; a goal that keeps you excited, interested and motivated.

“A” also stands for action-oriented, which means that goals should involve some action on your part. Don’t say “I’m going to be rich” because you will end up going nowhere. It doesn’t mention what you are supposed to do to accomplish the goal. Use action words like build, save, accumulate, travel, drive, establish, acquire and create when setting your goals

Realistic

A realistic goal means that it is “doable” although not necessarily easy. Find out if you have the skills, commitment, discipline and time to accomplish your goal. Aiming to accumulate P10 million by the time you retire at the age of 65 looks like a realistic goal. However, if you are already 60 years old and you only have P500,000 then this goal becomes unrealistic and out of reach.

Being realistic doesn’t mean you stop dreaming of greater things. The most difficult tasks can be accomplished if you put your mind and heart into it. When Michael Jordan first applied for a spot in a High School basketball team he was not accepted; the coach thought he wasn’t good enough. This early setback challenged the young Jordan to improve his skills. He became so good at what he does that many consider him as the best basketball player of all time.

Time-bound

A goal is time-bound when you set a time limit or deadline as to when it has to be accomplished. Without a deadline you are not likely to achieve your objectives. Pinoys love to procrastinate (“tsaka na lang” habit) and tend to do things at the last minute. Can you imagine what will happen if there’s no deadline? Nothing gets done.

“I will have my own multi-million peso business, someday” is not a smart goal because someday may never come. All your goals should have a target date of completion. You can say instead “I will establish within 5 years a business with a value of at least P10 Million.” Without a specific deadline you will have no sense of urgency, no reason to act today and take steps to get you nearer to your goals. The deadline also helps you to plan out your activities and monitor your progress.

Remember, never embark on any activity without first knowing what it is you are trying to accomplish. Otherwise, you could end-up wasting a lot of time, energy and money doing something for nothing… not a really smart thing to do!

Last update: June 2, 2008
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