Time and time again, we’ve seen research confirming that having a plan makes it much more likely that you’ll reach your financial goals.
Previous studies found that investors who have a financial plan accumulate three times the amount of wealth of non-planners.
Here’s the latest take on this theme:
Updated research by Annamaria Lusardi of George Washington University and Olivia Mitchell of the Wharton School of Business discovered that planners have median wealth of $307,750, versus $122,000 for those who do not plan.
That shouldn’t be too surprising, since top athletes, business people and other high achievers already know that the process of setting goals helps you plan where you want to go in life, and provides you with a road map to get there.
Basketball legend Michael Jordan talks about how he built his amazing career one small step at a time: “I knew exactly where I wanted to go, and I focused on getting there,” he says. Jordan set a series of small, progressive goals, starting with “a reasonable, manageable goal that I could realistically achieve if I worked hard enough. As I reached those goals, they built on one another. I gained a little confidence every time I came through. As I look back, each one of the steps or successes led to the next one.”
You can apply the same process as Michael Jordan to reach your financial goals:
- Write your goals down.
- Try to break them down into a series of small manageable steps, to be achieved one at a time.
- Put them in priority order.
- Make sure they are realistic.
- Be specific and concrete, identifying exactly what you want to achieve and by when.
Here’s some examples.
- Increase your retirement savings by hiking your contributions to your 401(k) plan by 1% every two months until you reach your target of 10%.
- To reduce credit card debt, pay an extra $100 each month on the smallest balance card to get it paid off, then start on the next smallest balance.
- Set up automatic savings toward your Roth IRA, transferring $250 each month from your checking account.
In no time at all, you’ll be on your way to turning your Financial Mission: Impossible into Mission: Positively Solved.