The words “goal” and “objective” are normally interchangeable. Indeed, most dictionary definitions use them to describe each other.
But when it comes to planning your financial future, there is a clear and important difference.
Discover what this difference is, why it’s important, and what it means for you.
Your financial objectives are part-and-parcel of achieving your goals
Some of your objectives, particularly ones related to your financial future, can be measured in terms of what you actually want to do, rather than being actual targets.
For example, your high-level objectives may well include:
- Preserving your capital while sustaining an income through your investment strategy
- Managing associated financial risks
- Maximise growth through a new or existing investment portfolio
- Minimising the amount of tax you pay.
All of those of are very laudable objectives. Effectively they are the building blocks that, through fulfilment, will help to deliver your goals.
However, other objectives may well relate to specific targets and, in this instance, they will be measurable. One expression often used to describe these is “milestones” which are to be considered on your financial journey.
Such milestones could be:
- Accumulating a specific amount in savings and investments by a certain time
- Having the means to retire at age 60
- Moving back to the UK to retire within the next five years.
These objectives will be concrete, measurable, and tangible. Having them in place will provide you with valuable clarity on the way to hitting your goals.
Your goals will be higher-level and personal to you
Unlike your objectives, your financial goals will be far less measurable and specific.
They are likely to consist of much higher-level aspirations, such as:
- To achieve a feeling of financially security, both now and in retirement
- Not be a burden on your family in your later life
- To be able to support your children and grandchildren financially if needed
- To leave a legacy for your heirs
- To achieve a desired lifestyle or fulfil some personal hobbies or passions.
We actually have a whole list of these on a “Master list of common financial goals” that we have started using in our consultations when we are talking through long-term aspirations with our clients.
A goal is an achievable outcome that is generally broad and longer term, while an objective is shorter term and defines measurable actions to achieve an overall goal.
While different, the two terms are often used in unison. This is because both are essential to putting together and executing your plan. However I believe that the differences between them are rarely acknowledged.
In my experience, you may well come to us with a series of objectives. We can then work together to translate these into your overall goals and put a plan in place to fulfil them.
Setting objectives to meet your goals
Let’s take a simple example to show you how your objectives and goals can align.
You may well be looking to be able to gift money to your children to help them with purchasing their first property.
Clearly, if your children are very young, you won’t know at this stage how much you’ll need to set aside for this purpose, and you won’t know whether you’ve achieved it until they’ve reached adulthood.
That leaves a lot of room for guesswork and uncertainty between now and then.
To avoid this, we will work with you to put together a strategy that takes into account the level of investment risk you are comfortable with, your investment time frame, and an assessment of how much you should be looking to invest.
We would then review this regularly to ensure you’re on track to achieve your goals and make adjustments to your plans if necessary.
The deeper question here, however, is whether accruing and gifting sufficient money to help your children buy a property is a real goal. to my mind, many people default to it as it sounds reasonable.
However, truly finding out whether this is a goal or simply an objective which is supporting a much deeper goal may require further consultation.
We will help you define your goals
One thing I often find when talking to clients is how many people believe their objectives are simply the same as their goals.
Given the dictionary definitions you read about earlier, it’s fair to say that is a perfectly understandable assumption.
As a financial planner, my key aim is ensuring that you appreciate how central your goals are to your financial journey.
For example, at the start of our discussion you may set out an objective of being as tax-efficient in the financial management of your assets as possible.
However, I’d see this as a means to an end, rather than simply an end in itself. Your ultimate goal is likely to be reaching a position where you’re financially secure in retirement so you can maximise the time you can spend with your family.
The benefit of cashflow forecasting
One of the keys to defining your goals and working out the objectives that you need to fulfil is cashflow forecasting.
When used effectively, it can give you an excellent overview of your financial future, and help you see whether you are on track to meet your objectives and achieve your goals.
It can also help you assess the effect of different financial decisions you may want to make, and how they may affect the achievability of your goals, thus in turn helping you to redefine or reprioritise your goals if needed.
Get in touch
If you’d like to talk about your own goals and objectives, then please get in touch.
You can contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.
This article is for information only. Please do not act based on anything you might read in this article.