401(k) Workshop, Part 1: Create Meaningful Financial Goals and Gather Your Financial Info

Welcome to Part 1 of 401(k) Workshop: Create Meaningful Financial Goals and Gather Your Financial Info.
Your 401(k) is an incredibly powerful tool to help you build wealth; however, it’s not perfect. Many people have expressed confusion and frustration with how to choose their investments, how much money they need in their 401(k), and an array of other issues. In addition, there are probably some unknown elements of your 401(k) that are working against your financial success!
This series provides a step-by-step process for evaluating your 401(k)’s purpose, understanding how your current financial situation affects your 401(k)'s future growth, and developing a plan for getting the most out of your 401(k) to better provide for your financial future.

By unknown (Sports event handout)[1] [Public domain], via Wikimedia Commons

By unknown (Sports event handout)[1] [Public domain], via Wikimedia Commons

Scottish Olympians and Financial Values

The Oscar-winning film Chariots of Fire portrays the life of Eric Liddell, a Scottish athlete and Olympian. Liddell, the child of devout Christian missionaries, came from humble beginnings, but he had an incredible gift. He could run--fast!

Liddell qualified to compete in the 100-meter race of the 1924 Summer Olympics in Paris. However, upon discovering that the race would be held on Sunday, Eric refused to participate. He instead trained for and competed in the 400 meter, an event for which he was initially ill prepared. On the morning of the big race, Liddell was handed a note by a team member which read,

“In the old book it says: 'He that honours me I will honour.' Wishing you the best of success always.”

In a stunning victory, Eric Liddell won the race.

Liddell had claimed victory in an event that wasn’t his own, but more importantly, he didn’t allow his hope of professional achievement to get in the way of his deeply held values.

Know Your Values

Choosing your financial goals should begin with understanding your values.  Where do you find the most fulfillment and worth in life? Is it

  • Providing comfortably for your family?
  • Promoting a particular social cause?  
  • Religious or community involvement?  

Before establishing goals, first consider your values.  Values are your best guide to worthwhile financial goals.

With Values in Mind, Develop Your Financial Goals

Once you know your values, you can craft your financial goals around them. For example, something I greatly value is having sufficient time to spend weekday evenings and Sundays with my family and serving in my church.

How does this affect my financial goals? Often my church service takes place after work hours. Since I also have a family at home who I want to spend time with, I need to aim to provide sufficiently for my family from 7AM to 5PM (my work hours), and then spend time with my wife, daughter, and serving in my church. A corresponding financial goal might be:

Have a career that allows me to earn at least $85,000 per year without requiring evening or Sunday work hours.

This is a measurable financial goal that fits within my deeply held values. There are obviously a lot of assumptions built into the dollar amount of my goal. I’ll cover this in 401(k) Workshop, Part 2.

Since this series is about getting the most from your 401(k), let’s consider a goal more closely tied to that.

Another goal of mine is to go on a service mission for my church with my wife while I am still healthy.  Again, I’m touching on a deeply held value.  A corresponding financial goal could be:

Have $15,000 in my 401(k) earmarked for a service mission by age 60.  This should represent no more than 1% of my total 401(k) balance by that time.

Implicit in this goal is another goal that I could have spelled out which is “Have at least $1,500,000 in my 401(k) by age 60.”

I strongly encourage you to go through this exercise.  It will make a big difference in how you view and use your money.

  1. Think of your most closely held values. Write them down and stew them over in your mind. Discuss them with your spouse or trusted friend.
  2. When you’re convinced of your most deeply held values, introduce money into the picture. Ask yourself how money can help you realize your values. You’ll start to see some financial goals begin to take shape.
  3. As these goals come to your mind, write them down. Check back to your values to be absolutely certain that your financial goals don’t forsake the values you hold.

Gather Your Financial Info

Once your values and financial goals are defined, the next step is to gather your financial data to bring sufficient clarity to your financial picture. This will help ensure that your financial goals are realistic and achievable.

The financial information you gather should be from any or all of the following sources:

  • Checking account statement
  • Savings account statement
  • Latest pay stub
  • Investment account statements
  • Credit card statements
  • Mortgage statements
  • Tax returns

Depending on the complexity of your financial situation, this is possibly the most time-consuming step in the entire planning process. But let me emphasize this: the data gathering process is absolutely essential. A complete understanding of your current financial picture--everything from income, to assets and debts--will bring clarity to your goals and create a more direct path to achieve them.

In 401(k) Workshop, Part 2 I’ll walk you through the process of analyzing the financial info you’ve gathered and seeing its impact on your goals.