Recently I read one pundit’s opinion that the best approach to one’s finances does not focus on goals but more on how you live your life. The idea was that goals were too constraining and could lead a client/investor to make foolish decisions in attempts to reach a goal at a specific time. The pundit suggested working within a framework that would encourage good habits and, potentially, results (my read of the thrust of the argument – not his words, which were even more vague; ask me for the link if you want more).
The whole thrust of the pundit’s statements seemed to be out of touch with what actually goes on with real clients and with goal based planning. First, with respect to real persons, many need a more defined structure to their financial activities than a vague approach or system. Setting incremental goals and a predictable program helps many persons stay on track and measure progress. Of course, there are persons who thrive on chaos and some will actually do well. But as a rule, some guidelines and goals are helpful.
Second, true goal based planning is very flexible and recognizes that things change over time – not just what we can do in terms of investing, saving and spending but also with regard to what we want to do. A client’s plan, including goals, should never be static or set in stone. It cannot be that way and also be effective for either the client or the goals. A plan, implementing a client’s goals and priorities, should allow that client to make the most of their current life and lifestyle while at the same time providing useful guidance to ensuring the same for their future. Without that plan, most of us will not have any idea if we are on track to have what we want and no plan to help us get there.
Goals are still the best way to get focused and build for the future while adapting to change along the way.