Setting, Meeting Financial Goals

(CBS)  When you were making those New Year's resolutions, you may have thought about some financial goals for 2007 and beyond.

On The Early Show Tuesday, radio host and financial adviser Dave Ramsey offered advice on making some changes in your financial life designed to set, and reach goals.

It all begins with planning.

You may think you set goals for the new year but, according to Ramsey, your goals could actually just be dreams. The problem is that dreams are wishes that seldom, if ever happen; they are fun, but they don't get you anywhere.

Vision, on the other hand, means having a clear picture of what you want, and being determined to make it happen.

Goals are the very practical building blocks that make visions come true.

For example, a dream would be to have no financial worries. A vision might be to become a millionaire. A goal, to pay off debt. A method, to contribute to your 401(k).

"The sad thing is that few people have goals and so few people convert their vision into action," Dave writes in his February 2002 book, "More Than Enough."

To read excerpts, click here.

Ramsey says it's important to set goals in all areas of your life — financial, social, family, etc. It's OK to be working on multiple goals at once, he says, as long as you follow through with them. Notice he doesn't say as long as you achieve the goals. He believes that once you've set a goal, you can't really fail unless you give up. As long as you're working toward the goal, you're improving your life, and that's what's important.

It's clear that Ramsey feels strongly about goals, because he asks everyone in his office to set a goal when they begin working with him, as he explains in "More Than Enough."

"At our office," he writes, "our team members are required to memorize and take into their gut our mission statement. They must chew it and swallow it down because our mission statement is the core vision of who we are. But we don't stop there. Every member of the team is required to have a personal mission statement that he writes down and which is kept is in his personnel file. Once a team member has the company and personal vision set, then we require personal goals showing how he will play his vision out in the real world. ... I do not set goals for our team, ever. They set their own goals, and the passion that flows from their shared vision has created a team of people pulling together with an intensity that is incredible."

Each year, Ramsey presents goal-setting and achieving ideas in a speech to his staff. He talks about the importance of goals and how to go about setting them. And he says that, each year, he'll have one or two people quit after they hear the speech, because they realize their current job isn't helping them meet their personal goals.

All goals are not created equal, Ramsey stresses. What makes a good goal? How do you know that a goal can be achieved?

Ramsey says all goals must:

1. Be yours: They can't be somebody else's goals for you (for instance, a financial planner saying you need to save for retirement). They shouldn't be another person's ideas or suggestions. You must own the goal.

2. Be Specific: Enough said.

3. Be Measurable: If you're making a financial goal, it's easiest to measure your progress if you have a specific number in mind: "I'll pay off $10,000 worth of debt this year; I'll send $300 to my credit cards each month; I'll save $250 for my child's college fund each month," etc.

4. Have a Time Limit: Decide you are going to accomplish your goal in a week, a month, or a year. Any limit is fine, you just need to have a finish line. That enables you to back into your goal and figure out exactly what you need to do, when. For instance, do you want to pay off your debt of $1,000 in a year, or 10 years? That limit will certainly affect the goal you set.

Once you start working on your goals, you might find you need to lower or increase your expectations, and it's perfectly acceptable to alter your goals at any point. If your goals become unrealistic, you're not going to achieve them; you will feel stuck and quit.

And, Ramsey stresses, it really is important to write your goals down. A study of Harvard graduates found that after two years, the three percent who had written goals achieved more financially than the other 97 percent combined!