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  • Writer's pictureMichael Urch

What Is the Purpose of Goal Setting in the Financial Planning Process?

Updated: Apr 1

In this post, I’ll cover what the purpose of goal setting is in the financial planning process, as well as the six mistakes to avoid when creating a financial plan.


Plus, I’ll share the process I use with all my clients that will allow you to have a financial plan that covers every single one of your most important goals.

 


What Is the Purpose of Goal Setting in the Financial Planning Process?

Written by Michael Urch, CFP® and Senior Wealth Manager, 360 Financial


As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products. This is one of the reasons he was attracted to 360 Financial’s client-focused culture.


Why Do Goals Matter in Your Financial Plan?


My job is to help clients to create a plan that focuses on getting to their goals.


This is impossible without having a clear understanding of what someone’s goals are. Sure, I could help someone save money on taxes, invest in a more savvy way, or stay the course when markets feel volatile. All of these things are important.


But none of these things really matter unless they’re helping clients move toward their goals. Without clear goals, it’s impossible to have a good financial plan.



How to Optimize Your Financial Planning Based on Your Goals


I recently sat down with a new client regarding his financial goals.


He has reached a place in life where he feels that he is work-optional, which he defines as having $220,000/year in lifestyle expenses funded out of his portfolio. 


He also has goals of buying a couple of properties when he sells his home in MN in 2027. Most importantly, he has a significant focus on reducing lifetime taxes. 


We talked through each of his goals line-by-line.


It was a 30-minute conversation simply confirming which of his goals were most important and which of them could hit the chopping block in order to make sure his most important goals were met. This is the kind of conversation that you can expect when you work with a fiduciary financial advisor who cares about your goals and vision. 


In my work as a financial advisor and wealth manager at 360 Financial, I focus on FORM when working with my clients on goal setting.


FORM is the acronym that every advisor at 360 uses to ensure we’re not missing any goals that a client might have. If you’re not quite ready to work with an advisor, try using the FORM process yourself as you plan your personal finances. 

 

Focus on FORM


F is for family. I want to know everything about your family. Not just who they are or what stage of life they are in. I want to know what priorities you have for them, and what specific goals we should set. This could be concerns about aging parents or about not being a burden on your loved ones when you age. Whatever goals you have for your family, we want to make sure that we never lose sight of them.


O is for Occupation. I want to know about your job and your career trajectory. Are you thinking of changing jobs at some point? At what point do you want to be work optional, and what does being work optional look like? We want to make sure to never lose sight of these.


R is for recreation. What do you like to do for fun? What is on your bucket list? What philanthropic efforts are you passionate about? How can we make sure that we have goals in place for any important things here?


M is for money. This is really the gas that gets us to the destinations for all of your other goals. I usually see similar goals like reducing lifetime taxes, never running out of money in retirement, and having a written investment strategy that is followed with discipline.


Walking through the FORM process ensures that every financial decision is made with a clear purpose, aligning investments, savings, and spending with these set goals. 


For high-net-worth individuals, this disciplined approach is vital for navigating complex financial landscapes and achieving long-term financial success.

 


6 Mistakes to Avoid When Setting Financial Goals

 

1. Setting Unrealistic Goals


Ambition is key, but goals should be achievable and realistic based on your financial situation.


Sometimes, this is something that needs to be refined throughout the planning process if you are not sure what is realistic for you.

 

2. Setting unclear goals or having unwritten goals.


Not running out of money in retirement” is too vague.


Instead, your goal should look like this: “To live on $100,000/year after taxes during retirement, not counting my mortgage and health insurance expenses. In addition, I would like to have $10,000/year to use for travel.”

 

3. Failing to Revisit and Adjust Goals


A financial plan is a living document.


Every year, you should be sitting down with your financial planner to review your goals and confirm that you still want to be moving toward them.

 

4. Being overly focused on money


Some goals require action items that are not only focused on money.


If you want college-educated children, maybe building a home library of good books and reading aloud to them from a young age may be more impactful than putting money in a 529 account. Passing on your legacy to your children means doing more than just leaving them your money. Make sure to take into account non-financial elements of the goals in your financial plan.

 

5. Neglecting to Prioritize Goals


What goals are “must haves” and what goals are “nice to haves.”


We all have finite resources, so it is essential that you are clarifying what goals are absolutely needed and what goals are allowed to be missed.

 

6. Forgetting to Integrate Goals with Overall Financial Plan


If you are not coordinating your overall goals with your financial plan, then something is broken.


Everything should be aligned and working together. If you are not sharing all of your goals with your financial planner, then you should reach out today and talk about how we can help you pursue them.

 

 


Neglecting to Prioritize Goals


Common Questions About What Is the Purpose of Goal Setting in the Financial Planning Process?

 

What is goal-based financial planning?


Goal-based financial planning involves creating a financial strategy based on specific life goals, such as buying a home, funding education, or ensuring a comfortable retirement. This approach aligns financial decisions and actions with achieving these predetermined objectives, making financial planning more personalized and effective.

 

What are the three common financial planning goals?


The three most common financial planning goals typically include short-term goals like saving for a vacation or emergency fund, mid-term goals such as buying a home or funding education, and long-term goals like retirement planning and wealth transfer. 


These goals provide structure to financial planning, ensuring a balanced approach to managing finances across different life stages

 

How does setting financial goals help families?


Setting financial goals helps families by providing a clear roadmap for managing their finances, aligning their spending, saving, and investment strategies with their aspirations and needs. When it comes to financial planning for families, it’s critical to consider all members of the family and the overarching goals. 

 

What is most important to you and your family over the short and long term? 


Whether you’re saving for your kid’s college education or buying a home or vacation property, being clear helps you get to where you want to be on time.


This approach not only helps in achieving specific objectives but also in maintaining financial discipline and avoiding unnecessary financial stress.

 

What are the benefits of having clear financial objectives?


The benefits of having clear financial objectives include improved focus in financial decision-making, more effective resource allocation, and increased motivation to stick to financial plans. Clear objectives also aid in measuring progress, making it easier to adjust strategies as circumstances change. 


You need to know what you want and where you’re going if you’re going to make progress. Without a clear objective, it’s easy to get distracted and spend in a way that doesn’t reflect your values. 

 

Can you explain how financial goals guide the planning process?


Financial goals guide the planning process by acting as benchmarks that shape investment choices, savings plans, and expenditure decisions. 


They provide a clear direction for financial activities, ensuring that every decision made is purposeful and aligned with achieving these set objectives, leading to more efficient and targeted financial management.



Connect with a Financial Advisor Online or In Person


Connect with a Financial Advisor Online or In Person

If you need a wealth management team to help you pursue your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial. 360 Financial is one of Minnesota’s best independent wealth management firms with over 30 years of experience. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 






Michael Urch

About the Author

Michael Urch

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products. This is one of the reasons he was attracted to 360 Financial’s client-focused culture. Michael likes to start with each client’s “why.” By understanding what’s truly important to them, the “what” of investment and planning strategies can be custom designed to support their long-term ambitions.




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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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