I wanted to end the week jumping onto the goal planning posts out in the blogsphere. There is even a carnival of financial goals. Obviously, all this goal planning has to do with a new year coming up but why now start now? If you can stick to your goals during the one of the busiest and craziest time of the year then you can achieve these goals any time of the year. This is especially true if they are spending goals since there are so many financial pressures being brought to bear this time of the year. Yesterday, we had a sushi lunch day at work. Great idea and everybody enjoyed it. Not sure why the holiday prompted us to do it but sushi is not cheap. I am sure we all have had our own mini-sushi lunch spending pressures occurring.

I learned 5 things about goal planning that I wanted to share. None of these are remotely my idea and I take absolutely no credit for them. On a good day, I do about 3 of the 5. I hope you can beat me.

1. Know where you are

I work with a bunch of “old guys.” Very senior businessmen who have seen everything. One thing one of them told me something that always stuck to me (and he told us this when all hell had broken loose)- let’s assess the depth of the problem before we come up with a solution.

In order words, know what you have before you goal plan. It is easy to say I want to be financially independent in 2008 but how close are you to that now? Are you totally debt free and flush with cash? Or do you have a hard time rubbing two nickels together?

I use to review a lot of business plans and I noticed a lot of them had these broad mission statements which was totally removed from where the business was the previous year which meant the business had to do a 180 degree turn to get to where it wanted to be. Could it be done? Maybe. But in some cases, the goals were so far removed from where the business was at, you knew it wasn’t going to happen. You need to assess context to goal plan.

2. The SMART goal setting exercise

This is from the human resource world. When you goal planning always keep the SMART acronym in mind.

S is for specific
M is for measurable
A is for achieveable
R is for realistic
T is for time framed

An example of an un-SMART goal would be: “I want to make a lot of money in 2008″ or “I want my house to be worth more next year.”

An example of a SMART goal would be: “I want to increase my net worth by 10% by December 31, 2008 by increasing my savings rate from 7% of take-home pay to 10% of take home pay and reduce my fixed expenses by 5% a month” or “I want to increase the worth of my home by finishing the basement by June and putting a new counter-top in the kitchen by December.”

If you cannot be that specific then go back to #1 and figure out where you were at.

This exercise is hard- it assumes you know where you are at and then it requires a definitiveness of purpose. Three years ago, I finally put together a filing system to figure out my expenses and then looked at yields on stock. This goal does require quite a bit of patience and a good couple of hours of quiet time.

3. The Rule of 3

I never plan more than 3 goals for the year. 3 is bite-sized and manageable. If I set 5-8 goals, there’s too many to track. 3 goals also keeps me focused. Too many goals means I will drop the ball on at least one and be discouraged about the others.

In a personal finance context, one of my goals is always about cash flow (reduce my expenses or increase my income while maintaining my current level of expenses) and another one is always about increasing dividend yield. Thus, one for defensive purposes (save money) and one for offensive purposes (make money tax-free).

4. How?

A goal is a strategy to me. Right under every goal, I added up to three steps to reach my goal- these are the tactics of how I will reach my strategy. For example:

Strategy: Increase dividend income by $500 in 2008

The above is an example. Don’t worry about the math.

5. Find Someone to hold you accountable

Get an”accountability buddy” who you meet periodically to review your goals and to keep you on track and you can do the same for their goal. It is hard to stray from your goals if you know you have to answer to someone every month. The point of an accountability buddy is not to report progress every time you meet- in some periods nothing may happen- but to keep your goal top of mind and keep focused on them. Make sure it is someone who will kick you in the behind every once in a while and challenge you on why you are not keeping up with your goals as opposed to a mere yes person or someone who is a push-over.

Here’s the catch though- the reason why this is last is that your accountability buddy isn’t going to do you much good when you have poorly defined goals. I use to meet with an accountability buddy for a long time who finally said to me: “rework your goals to be more specific and then we can really make progress.” The light bulb went off in my head at that point.

I find this one the toughest to keep- sometimes you have no progress to report but you should meet anyways. Other times, life gets in the way. Sometimes when I am not meeting my goal, its tough to meet and say “I am failing this month.” But, you have to make this part of your routine.

There is a group called TEC which is a group for CEO’s and senior executives of very successful corporations. The members meet to improve the performance of themselves and their companies. They meet once a month for a full day. Imagine CEO’s of multi-million dollar corporations taking one day out of every month to talk about their business instead of working on it! But the primary purpose is to hold each member accountable and focus them on their goals. They are CEO’s for a reason- they don’t just set goals but execute them with peers holding them accountable.

As I said these are hard guidelines to follow, I always have a hard time keeping up with #2 and #5. Truth by told, I have really been neglecting #5 (sorry, accountability buddy!). But when I bear down and do all five, consciously or unconsciously, its really productive. I hope these tips others have taught me work for you.

Have a great weekend.