Hello, ace007-ga!
Does setting financial goals actually work? Is it truth or hype?
There are conflicting answers to your question. The answer appears to
lie somewhere in the middle.
Goal-setting, it seems, works for some and not for others. However, I
have found no evidence to suggest that it is not important to have
some sort of goal in mind. The steps to reaching that goal differ,
however.
I have tried to find opinions on both sides of the fence. The
ultimate criteria for deciding whether goal-setting will work for you
is to try it. Only you can find the methods for achieving your
financial goals that best fit with your own personality.
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The lack of "financial literacy" and understanding of money and
savings has created an increase in personal bankruptcy, according to
an article in the fall issue of "Assets."
Financial understanding is the first step in developing a strategy
for savings, and successful achievement of financial objectives.
The following excerpts are from "Bankrupt at 18 - A Call for Financial
Literacy Education," by Inger Giuffrida, Corporation for Enterprise
Development. Assets. (Fall, 2000) at
http://www.idanetwork.org/assets/fall2000/fall2000b.html "
"A primary cause of personal bankruptcy in the United States is lack
of personal financial literacy. Many people do not have the basic
knowledge or skills to manage their money or plan for their futures.
Never has the personal bankruptcy rate been so high - and never has
the U.S. personal savings rate been so low. The sav-ings rate has been
hovering at zero, even dipping to -2%."
"In a 1999 speech before New York City's Media Studies Center, Arthur
Levitt, Chairman of the U.S. Securities and Exchange Commission (SEC),
said, "The plain truth is that we are in the midst of a financial
literacy crisis. Too many people don't know how to determine saving
and investment objectives or their tolerance for risk. Too many people
don't know how to choose an investment, or an investment professional,
or where to turn for help." Financial literacy education provides an
opportunity to develop practical skills and knowledge about money,
economics, and personal finance.
***************************************
"Goal setting and planning are central to financial literacy and key
to changing saving and spending behavior. The SEC's Levitt pointed out
that low-income savers who have financial plans report having twice as
much in savings and investments as those who do not have a plan."
***************************************
"Fortunately, there is proof that financial literacy training helps.
Results of a 1998 national survey show that as few as 10 hours of
financial literacy instruction will prompt teenagers to start saving.
A survey commissioned by the National Endowment for Financial
Education (NEFE) and the U.S. Department of Agriculture Cooperative
State Research, Education and Extension Services of 4,107 students who
participated in the NEFE High School Financial Planning Program found
that three months after completing the program, teenagers had improved
both their spending habits (58%) and savings habits (58%), with 39%
starting savings accounts. Financial literacy education helps youth
develop practical skills in money management, economics and personal
finance that influence their choices and habits as adults."
*******************************************************************************
A different view on financial goal-setting is highlighted in the
article,
"Goal Setting Is Not The Answer To Success." The article, which
profiles Don Dwyer's book titled "How You Can Become a Successful
Entrepreneur, Regardless of Your Background"
may be found at http://www.b4-u-buy.com/03b35984.htm .
Though Dwyer does admit that high achievers are "avid goal-setters,"
he stresses that the strategy only works for a very small percentage
of people. For the majority, goal-setting only leads to frustration.
He prefers another method, which he has termed "targeting." Goals can
be set, but the targeting strategy allows for the possibility of
missing the target, and aiming again. This process eliminates the
feelings of failure that often accompany missed goals.
Some excerpts from the article follow:
"Goal setting does more harm than good for most people," so said the
late Don Dwyer, who overcame countless obstacles in life en route to
building a multi-national business empire. The following article has
been adapted from Dwyer's book, Target Success: How You Can Become A
Successful Entrepreneur, Regardless Of Your Background.
"It will certainly surprise many of you that I am not going to
'lecture' about setting goals," wrote Dwyer, who helped more than a
thousand individuals become entrepreneurs before his death in 1994.
"Many authors and motivational speakers talk about goal setting,
supposedly to encourage readers and listeners, and to inspire them to
reach greater heights in their lives. To me a goal seems like
something that's a long way away, and I can't get very excited about
that. Like most people, I need immediate gratification in my life."
"Dwyer described goal setting as a win-lose proposition, and he used
statistics to back up his opinion. Only a small percentage of people
achieve huge financial success in the United States-less than five
percent. Those who succeed, said Dwyer, set goals. In fact, he said
the achievers are avid goal setters."
"But what about the 95 percent of people who do not earn the big
money? Many of them set goals, too. However, they didn't reach their
goals. So they gave up. Dwyer said, "They probably became frustrated
on the long, bumpy road to goal achievement and they quit."
"Goals have a finality about them. People either reach their goals,
or they don't. Those who don't, fail. And they quit."
"I think almost everything we've ever learned about goal setting sets
us up to fail, not to succeed," wrote Dwyer. "Even worse, the goal
setting process leaves us feeling miserable about ourselves when it
doesn't work. Set a goal. Fail to make it. Quit. And feel miserable."
Dwyer urged people to avoid that process."
"I do believe in goals," he wrote. "However, I have developed a
different approach to pursuing goals. I call it targeting. It's a
win-win proposition."
"It was Dwyer's belief that targeting could work more often for the
entrepreneur. Like goal setting, targeting imposes a value system, but
unlike goal setting it provides the flexibility of more than one way
to be a winner. Targeting can be used to set objectives, but without
the negative stigma of a goal."
*******************************************************************************
Stephen W. Gibson, an Entrepreneur in Residence at the Center for
Entrepreneurship in the Marriott School of Management at Brigham Young
University, is one individual who has setting financial goals very
helpful.
Gibson purchased a set of personal development tapes in which Paul J.
Meyer, the founder of the Success Motivation Institute defined success
as "the progressive realization of worthwhile, realistic goals."
***********
"Once I understood that definition, I focused on setting personal
goals so I could have progressive realization of my goals."
"I believe the application of that definition did more for me in
obtaining financial independence than any other single development or
activity in my life. Soon my wife and I were writing down our yearly
and lifetime goals, then we got our four children into the habit."
"The more I reviewed my goals, the more I accomplished them. Soon
there was a magic about my achievements, and people, for the first
time in my life, started calling me Lucky. And luck wasn't limited to
me. Studies of alumni from some of the most respected universities in
the nation have shown that the 3 percent of graduates who set and
write down goals out-earn the 97 percent who don't. That fact alone
should convince all doubters about the power of goals."
To read more about how Gibson applied goal-setting to develop one of
the "500 fastest growing privately held companies in the United
States," read the article titled:
"SUCCESS IS SETTING GOALS - AND MEETING THEM," by Stephen W. Gibson.
Desert News. (11/10/1996) at
http://ace.byu.edu/backup/SGarticles/sg11_10_96.html
Additional Reading
******************
"AMERICAN EXPRESS 401(K) PARTICIPANT SURVEY REVEALS GOAL-SETTING
DRIVES CONFIDENCE IN RETIREMENT PLANNING." American Express.
(10/24/2002)
http://home3.americanexpress.com/corp/latestnews/401k-survey.asp
Again, it definitely appears that financial goal-setting does have
validity. Having an idea of what you hope to achieve and possessing
the knowledge of how to get there are definitely important. Yes,there
is a lot of hype concerning methods. But it has also been shown that
goals are an important aspect of achieving financial success.
Unless, of course, you win the lottery! But even that involves some
planning! You must have enough of a plan to at least buy the ticket!
Here's to finding the method that is right for you!
umiat
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