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Q: Planning - Hype or Proven ( Answered 4 out of 5 stars,   3 Comments )
Question  
Subject: Planning - Hype or Proven
Category: Business and Money > Finance
Asked by: ace007-ga
List Price: $25.00
Posted: 05 Feb 2003 00:00 PST
Expires: 07 Mar 2003 00:00 PST
Question ID: 157521
Is there any evidence that having a written financial strategy with
defined financial obrectives and regular reviews actual increases you
chances of achieving your objectives?
Answer  
Subject: Re: Planning - Hype or Proven
Answered By: umiat-ga on 05 Feb 2003 23:47 PST
Rated:4 out of 5 stars
 
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.


*******************************************************************************
                    
         
 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  

Google Search Strategy
+proof of +financial +goal-setting
+Percentage +financial +success +goal-setting
+surveys +goal-setting
ace007-ga rated this answer:4 out of 5 stars
Would have liked more evidence than given but generaly happy.

Comments  
Subject: Re: Planning - Hype or Proven
From: martinjay-ga on 05 Feb 2003 08:57 PST
 
Yes, if in fact your 'financial strategy' has some sort
of actions and rationale to which it is tied.  This
means two things:
1) Financial strategy is based on facts and reasonable
expected outcomes, not just 'what you want'
2) You have outlined what you are going to do to 
acheive this and at some level of buy-in the people
who will be responsible for success agreed.

The thought here as to why it has a better chance
of success is that you have bounded your objectives
from 'what you want' to 'what you want that you should
be able to do' then added 'what will make that happen'
and a focus to make it.  I am the author of a strategy
methodology, very simple and direct.  It is more or less
the expansion of two questions that define strategy:
1) What businesses do we choose to be in?
2) How will we compete in our chosen business?
Each of these questions has 5-10 questiont that
support it, in true McKinsey Pyramid fashion, and
from there they branch out to make a whole host of
actions from which to focus the work to develop it.
Subject: Re: Planning - Hype or Proven
From: ace007-ga on 06 Feb 2003 02:59 PST
 
I am very interested in finding out more about the strategy
methodology outlined by martinjay in the comments where can I found
out more information?
Subject: J-Strategy - a short lesson
From: martinjay-ga on 06 Feb 2003 16:34 PST
 
I am a consultant by trade, and charge a lot, but will try to
put down some more details since you nicely requested.
(Thanks by the way, hope I can help)

Some details of 'J-Strategy'

First, many strategy methodologies have 5 major steps,
and these are defined below.  J-Strategy's purpose was
to make it EASY for anyone, small businesses in particular
to develop a strategy without hiring a consulting firm.

Understanding of the company’s situation – many times this is passed
over as a general assumption of all of those participating.  “Where we
are today.”
Objectives – this would be the “where are we going”, “where could/can
we go” and finally “where do we want to be.”  Regardless of how they
are structured and formulated (financial targets, growth plans, image
expectation, position), people developing the strategy plan where the
actions will take the company.
Analysis – this, like the understanding of the situation, is almost
never done to the degree it should be (because it is a lot of work)
and requires the basic admition of developers (executives) that “we
don’t know everything.”  A VERY thorough internal and external
analysis should be completed before moving on to the actual decisions
to be made or directions to be followed.
Decisions – these are finite, tangible things that come from a
strategy with respect to decisions, resource allocation and staff
actions.  In some cases they are guides for lower level decision
making, and help direct people to actions which support higher level
goals. “How we are going to get there.”
Implementation Plan – here you decide how your key decisions will be
made and when, as well as how directions can be followed by all line
staff.

The methodology is driven by answering the two top questions,
then using supporting topics to drive all encompassing options
which will help answer them.  Below is the list.  

What businesses will we be in?
 Products - what will we sell (produce, provide or buy)?
 Services - which services will we provide?
 Geography - where will we do business?
 Customers - who will we serve?
 Channels - through what means will we reach the market?
How will we complete?
 Spectrum of Services - provide broader range to customers
 Scale - have larger reach/lower cost structure
 Quality - longer life/fewer defects/higher performance than others
 Price - offer lowest prices
 Differentiation - features/services which others do not have
 Relationships - developed closeness to customers

J-Strategy is a 50 plus page PPT document, of which
this is the general gist of what is there.  Please comment,
my intention when I have time in the future is to clean
it up, then give it to the SBA for public dissemination.
I give the guy who gave me the idea for this credit, he
was my boss on a project in Seoul in 1996 and this was
his answer to our Chaebul CEO's question "What is strategy?"
(His answer was the two questions, I built the rest).

Good luck.  To anyone reading this, I am curious to
your thoughts or feedback.  My goal was to take Strategy
and make it into something everyone could relate to
and understand.

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