BOSTON – A lot of people have a nameplate on their desk, something visitors see whenever they arrive. At my desk, there's my name on an envelope.
It's not a reminder of who I am but instead serves as a reminder of who I want to be and what I want to do. The envelope holds my list of goals.
This week, for the 20th year in a row, I will write down a list of goals for the coming 12 months, put that list in an envelope and mail it to myself just before New Year's Eve. The sealed note stays in plain sight -- tacked to the top of my bulletin board, directly in my sight line when I stand up -- for a year, until I work up the nerve to open it, score it and think seriously about how to make things better in the year ahead.
My goals from one year become something to build on -- or catch up to -- the next.
I started my quirky system two decades ago because New Year's resolutions lacked that lasting momentum and never worked for me.
What's more, I dislike resolutions because they typically end in disappointment. Once a resolution is broken, the resolve to make something good happen usually is gone with it; with goals, missing a day doesn't break anything, and my sealed envelope is a good reminder that I still have plenty to work on each day.
I never memorize my list of 30 or so items, but I know they cover everything from work habits to weight, with a strong emphasis on saving and investing mixed with a few ideas that simply would make me a better person. A good year is one in which I nail half of my targets and get close to the bull's-eye on about half of what is left.
It's not a flawless system -- there have been some bad years -- but it has worked for me, and for countless people who have tried it and told me about their results it since I first wrote about it many years ago.
One key way to achieve goals, particularly the financial ones, is to have concrete targets, with measurable numbers and progress that shows up through reasonable effort more than wishful thinking.
If you are planning to set financial goals for yourself in 2006 -- whether you use my quirky system, make resolutions or have your own methods -- here are a few targets worth aiming for over the next 12 months:
Save your next pay raise
If you get by on your current salary -- even if things are tight -- take some or all of the next raise and use it to pump up the emergency fund, then to build your retirement plan, employee stock ownership plan or your favorite stock or mutual fund account.
In this way, your current standard of living is stable, but your future comfort improves dramatically.
Plan for the worst
If 2005 taught us anything, it's that we're one massive storm away from disaster.
Your crisis may not be a storm, literally, but perhaps health problems or workplace cutbacks that blow down your financial house.
With that in mind, make a disaster plan, one that gives you a strategy for what you will do if the worst happens. Cover your career -- it may be the most likely crisis -- but include health and other conditions, so that if you wake up someday in 2006 and have to start over (or stop doing everything), you have a road map to recovery.
You may surprise yourself and decide that your disaster plan might even be your next personal goal or dream to fulfill.
Cut the fat
Identify eight ways to cut $500 in spending and put them to work; capture the savings. Pick any target you like, but I like this math because achieving your goal gives you enough to fund one Roth IRA to the max.
Find ways to not spend money, by looking at your bills, receipts and spending/entertainment habits.
Dramatically increasing the use of coupons, for example, might cut $500 a year in grocery spending (have a set-aside account, and put the savings there to build up). If you've got a $4-per-workday coffee/snack habit, cutting it in half saves $500 in a year. Look for free and low-cost events in your community; going to movie night at your public library will save a bunch from a visit to the movie theater each week. Eliminating wasteful spending -- the premium cable channel you don't watch, the subscriptions you don't read and the like -- will create more savings.
Coming up with eight areas is tough -- I didn't get there in '05 -- but making progress on multiple fronts certainly is possible. The savings may be unimpressive initially, but they will grow significant over time. Moreover, you won't miss the things you give up.
Pay the bills on time
Timeliness is the big issue with creditors these days. Paying the minimum on time is much better than making a huge payment that's three days late, especially if your lender happens to have punitive rates -- so that a single late payment carries a penalty far worse than a simple late fee -- or a "universal default" clause, which allows them to stick you with higher rates if you make a late payment to anyone, even if you have always been on time with them.
Increase your charitable contributions
You work hard for the money, but don't ignore the joy that comes with giving some of it away.
If you managed to avoid being ruined by the natural disasters of 2005, thank your lucky stars and find a way to help those people who weren't quite as fortunate. If you don't believe you contributed more to charity in 2005 than a year ago, make sure you don't repeat that situation in 2006.
Keep money's place in your life in perspective
It's pretty easy these days to spend every waking moment following, measuring and tinkering with your investment portfolio. That's not always time well spent.
Investment portfolios don't require minute-by-minute attention. Your family and community could undoubtedly benefit from your increased involvement.