Part of: How Does the Net Worth Planning Process Work?
Net worth allows us to assess our current financial situation and allows us to set short and long-term goals based on solid data. Setting annual net worth goals is an effective strategy, but the results will only be as good as the process and the data involved. When setting net worth goals, it is important to be realistic.Remember that the calculation of net worth and goal setting are the easy part. The money is made in developing and implementing the strategy. This is similar to the concept of goals vs. objectives.
Goals are qualitative, general ideas of what is desired. Goals are necessary, but it takes quantifiable objectives to ensure progress. With quantifiable objectives progress can be measured and adjustments can be made if the desired results aren’t being produced. This is the only way to ensure progress. For example, anyone can say that they have the goal of becoming a millionaire. The successful individual will establish objectives in order to achieve that goal, a plan of action, and follow through with it. With this process they are able to identify and correct shortcomings. It’s much better to realize that you’re not on track for retirement at 35 than at 55.
Keep in mind that though annual goals (or whatever the frequency of your goals) can be technically considered objectives because they are measurable in terms of progress towards your ultimate goal, I prefer to call them goals.
Annual goals with more frequent objectives are much more tangible than an ultimate goal with a lifetime of objectives. This tangibility is important because it breaks up the process, allows us more opportunities to appreciate our progress and increases the likelihood of following through. Though more of a human factor, these are just as important as any. No matter how great a plan is, if not followed through is worthless.
