When drawing up a financial plan, the first step that you need to take is setting goals. As Yogi Berra said, “If you don't know where you are going, you'll end up someplace else.” So before you begin planning your financial future, decide what your ultimate objectives are.

Building STRATegic goals

Once you define your goals, the next step is to make them STRATegic. That is: Specific, Time-bound,Rigorous, Attainable, and Tempting.

What do each of these mean, and how can they be applied to your goals?

Specific

When setting a goal, be specific about what you want. Don't just choose some vague idea, but be clear and exact. Consider the what, why, and how of your objective: “What do I want? I want to retire by age 60 (that's the ‘what') so that I can have more time to volunteer teaching chess to kids (that's the ‘why'). I can accomplish this by taking an early pension and changing more of my investments from stocks to bonds (that's the ‘how').” Each goal should be clear, simple, and easy to measure.

Time-bound

If you leave this goal to be achieved “sometime in the future,” chances are it'll never materialize. Time-bound goals create urgency. They force you to take action now. Though setting a deadline to achieve a goal could seem arbitrary (“Why one month and not six months?” you might ask yourself), think about how the power of external pressure compels you to triumph.

At the same time, be realistic when setting up your time limit. Life has a habit of happening, so you should always take into account any possible setbacks or delays in your calculations. If you try to run too fast, you can end up getting discouraged. To boost your motivation, find a way to measure your progress as you go. You can then adjust your time limits if you need to, depending on circumstances and a more realistic view from out in the field.