How a Master List Can Help You Prioritize Your Goals

Setting financial goals is hard. We all have multiple, often competing, goals for the available resources we have. Some of our goals are about avoiding things, like not being able to pay our bills, while others are about gaining things, like as much wealth as possible. Some require us to avoid risk, others to embrace it. This often means difficult trade-offs are required.

To make things even more challenging, behavioural biases often come into play. Some studies have shown that when asked to recall our top three goals, we're likely to choose those that come to mind first, which aren't necessarily the most important to us. This can lead us to pursue the wrong goals. A simple nudge, like using a master list, can help us choose the ones that truly have meaning and motivate us.

What is a master list?

Quite simply, a master list is just as it sounds. It's a list of all the "big things" that you need to (or want to) do at some point, all written down together and kept in one place. In this case, it has to do with our money aspirations. When it comes to goal setting, there are key benefits of using a master list, including:

1. Identifying our true financial goals. Because of behaviour bias, we reflexively choose financial goals we hear about most, but which may not truly be our goals. Writing them down may give us more clarity.
2. Making the goals more specific and motivating. The statement "I want to be comfortable in retirement" is vague. Would a "comfortable" retirement require us to replace 50 per cent our pre-retirement income or 100 per cent of it?
3. Gaining a greater emotional connection to our goals. Emotions play a large role in reaching our financial goals (to name a few, excitement can make us overly optimistic, while sadness may have the opposite effect; anger may lead to rash decisions, anxiety can cloud our judgement). Being emotionally honest and motivated to reach our goals helps us to stay on track.

What can a master list do for me?

The benefits of choosing goals correctly are numerous. According to one investment research study, a goals-based financial plan could add around 15 per cent to a hypothetical family's wealth. Another study estimated that a retiree's wealth could increase by almost 23 per cent by doing things like identifying goals, determining a strategy, implementing your plan and reviewing progress.

What kinds of goals should I consider?

Goals are personal, of course, but sometimes we need a list of ideas to help get us started. An RBC poll of 2,000 Canadians aged 18-plus released last year offers some good kick-starters. Among the financial priorities identified in that study were things like:

• home ownership
• debt reduction
• retirement savings
• savings for a rainy day
• savings for a big "self-rewarding" purchase
• just want to keep my head above water
• home renovations
• children's education
• supporting aging parents

Other ideas might include vacation, leaving an inheritance or supporting charitable causes.

Once you've got your master list, you can start narrowing things down or prioritizing. Try whittling down your list to three to five, then rank them in order of importance.

For more, check out the goal-setting tool to help you track your progress.