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How to Set Life Goals and Create a Financial Plan for Achieving Them



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Editor’s Note: This story originally appeared on NewRetirement.

Setting long-term financial goals is really important. However, the most important long- and short-term financial goal actually has nothing to do with money.

Before determining when you can retire and how much you need, you really ought to know exactly what you want to do with your life.

What is your vision for your future, starting right now?

Why a vision for your life is important for long-term financial goals

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What is the point of saving a certain amount or retiring on a specific date? And, how do you even know how much you need to save or when you should retire if you don’t have a vision for your life?

Knowing what is important to you is — by far — the most important long-term financial goal. Your vision determines everything you need to do to achieve the life you want.

Ask yourself questions to help set your vision

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Setting a vision for your life is no small task. However, there are questions you can ask to make it easier. The following are a few to consider.

As you think about (or preferably write down) your answers, it is okay to have responses that vary over time. Your vision does not necessarily need to be fixed, it can evolve over different phases of your life.

What is important to you?

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“The meaning of life is whatever you ascribe it to be. Being alive is the meaning.” — Joseph Campbell

“Whatever we are, whatever we make of ourselves, is all we will ever have — and that, in its profound simplicity, is the meaning of life” — Philip Appleman

“There is not one big cosmic meaning for all; there is only the meaning we each give to our life, an individual meaning, an individual plot, like an individual novel, a book for each person.” — Anais Nin

You get to choose what is important. The important thing is to choose.

For some people, happiness is life’s holy grail. For others, it is a sense of meaning and purpose or of community.

For you, it may be helping others, learning things, experiencing awe, having fun, or to achieving some feat of intellect or physicality. Or, maybe it is something else entirely. Just choose.

What are your values?

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This is another big existential question, worth answering.

Values are fundamental beliefs that motivate your actions. They aid you in making decisions and setting priorities.

You may have a good intuitive sense of what you value. Perhaps you are even one of the few that have them written down and refer to them regularly.

Or, maybe you are like most people and aren’t really exactly sure about which values are most important to you. If this is you, you may benefit from evaluating a list of values and prioritizing them.

Here are a few examples of values: authenticity, balance, friendship, kindness, truth, love, respect, status, honesty, integrity, adventure, consistency, courage, open mindedness, etc.

Who do you most want to spend time with?

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Not enough time with family and friends is a common deathbed regret. It is useful to prioritize who is important to you and ensure that you maximize your time with them.

What is your perfect average day?

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A perfect day might involve peak life experiences, like scaling Mount Whitney, a day at Disneyland, volunteering at a coral farm in Fiji, or getting a hole-in-one before an epic birthday party with your best friends.

However, this question is about defining your perfect average day. How would you most like to spend every day of your life? What are the daily habits and responsibilities you want to have?

What experiences do you want to have?

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Your day-to-day existence is super important, but if you do also want to have special experiences, be sure to include those in your life’s vision.

What trips do you want to take? What experiences do you want to have?

What all do you want to do? (Need inspiration? Here are 120 things to do in retirement — or anytime.)

Where do you want to be?

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Where you live is a big part of your life. It can determine what you do, with whom, and at what cost.

Are you in the right place for you? In the right home?

Now, let’s look at some techniques to help you set your life’s goals.

The 5 whys

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What is your why?

The “5 whys” is a technique for problem-solving and it can be applied to goal-setting. It was developed in the 1930s in Japan by the founder of Toyota. The technique involves asking why questions and drilling down until you get to the real problem or the real why for a goal.

  • For example, you might already have a goal of retiring at age 61 with a net worth of $800,000.
  • However, ask yourself, “Why 61?” And, your response could be: “Because I am tired of working.”
  • Then ask, “Why are you tired of working?” to which you might reply, “Because it isn’t really what I want to be doing?”
  • Next ask, “Why do you want to do something different?” And, the reason could be, “Because work doesn’t give me enough time to spend with my grandchildren and work in the garden.”
  • And then you could ask, “Why do you want to spend your time with grandchildren and in the garden?” And, your response could be your why: “Because this is what makes me happy.”
  • Then consider, “Is happiness your life’s goal?” If yes, you have your why. If no, figure out how your goals should change.

And, boom. You have arrived at the goal that matters: spending time with your grandchildren to achieve happiness.

Consider your ikigai

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Ikigai is another Japanese concept. It translates from Japanese to English as “reason to live,” and it is the intersection of what you:

  • Love
  • Are good at
  • Can pay for
  • Think the world needs

Learn more about ikigai.

What regrets do you want to avoid?

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Most of the time, when setting goals, it is useful to think about what you want. However, it can also be helpful to consider what you don’t want.

Project forward to your deathbed. And think about what you might regret at that time. This is a dramatic technique that can really focus your thinking on what is important.

Visualize your future through budgeting

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Budgeting may sound mundane. However, when you set a budget for the rest of your life, you are expressing (in concrete terms) what is important to you.

And it can help you visualize your future and prioritize for the life you want.

NewRetirement’s PlannerPlus enables detailed budgeting in over 75 different categories.

Set life goals and a financial plan for achieving them

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Once you have set your life’s goals, it is time to build a financial plan for how to achieve them. That plan is where you set the specific, measurable, achievable, relevant, and time-bound financial goals, like:

  • How much to save and for what?
  • When to retire?
  • How much can you spend? How much income do you need?
  • How quickly should you pay down your debt?
  • Should you downsize? Buy a vacation home? How should you think about your home equity?
  • What is the ideal asset allocation?
  • Do you want to leave an estate and how much?

The good news is that setting financial goals with respect to your life’s vision makes the financial goals meaningful and you will be more likely to achieve them.

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