Transforming Goals Into Actions

I have to admit that when I first start this blog, I didn’t have a solid goal. The truth is that I had just finished reading Rich Dad, Poor Dad, and felt motivated to improve my finances. I used to have a meta-blog (blog about blogging) and recognize how proficient I became with that subject. I thought it was a good idea to start a blog about personal finance to hone my money management skills. I also knew that I can make decent money selling advertisement on my blog, and if I do it right, the blog itself could be worth something.

So there you have it. I am blogging because I want to learn more about money and build an alternative source of income.

Photo by Kyle Stauffer via Flickr

Now, blogging has a very low cost of entry and low risk, so I was able to jump in without a formal business plan. If this was a more traditional business like starting a McDonald’s franchise, I wouldn’t have jumped in like this. I would have consulted the Small Business Administration, take advantage of services offer by SCORE, and do a lot more planning.

The Problem with Goal

Defining a good goal is hard enough in itself, but even with a great goal — i.e., SMART goal similar to my $1 million by 2017 goal — businesses and individuals still fail. Why? One thing that many people fail to do is turning their goals into actions. Generally, a high-level goal is broad and hard to directly impact — any actions meant to directly affect it are often unproductive. To transform goal into practical actions is to keep asking the question how?, until we have atomic and manageable objectives with a set of actions that can directly and effectively impact the outcome.

An Illustration of the Principle

Let’s take a theoretical media business that thrive on advertisement and paid subscription revenue. The business has the following high-level goals:

• Increase revenue
• Reduce cost

As you can see it’s a little hard to think of something practical we can do to impact these high-level goals. And if we fail to break it down into smaller chunks, we may ended up doing unproductive activities like obsessively going over the data looking for trends, having meetings about why the revenue is flat, etc.

Let’s take a look at just the first goal and ask how can we increase revenue?. Our next set of sub-goals may look something like this.

• Increase circulation size (i.e., number of subscribers, number of copies sold, etc.)
• Increase number of advertisers
• Increase revenue per advertiser
• Increase revenue per subscriber, or per copy cold
• Increase revenue per publication

As you can see, each sub-goal is more manageable than the original goal. However, we can still continue ask how? and make it even more manageable yet. Let’s take a look at the first sub-goal, and ask how we can increase the circulation size?

• Increase marketing and advertisement spending — e.g., to build brand recognition and demand
• Lower subscription cost — e.g., to increase value and make the purchase more attractive
• Lower cost per copy
• Broaden the scope within the niche — e.g., turning a magazine about iPods into one that’s about MP3 players
• Improve distribution channels — e.g., sign up new retailers to carry the magazine, expand into neighboring regions, etc.
• Expand into other media — e.g., expand from hard-copy publication to web-based publication

I think you can see where I am going with this. Notice that each time we ask the question how?, we make the goal more manageable, and the actions to accomplish it more defined and productive. In essence, we are building an upside down tree as illustrated below.

Applying the Principal to Personal Finance

How can this business concept be applied to personal finance? Well, let’s take a look at a common goal:

• Securing a comfortable retirement

How are we going to secure a comfortable retirement? By definition, retirement means we have enough income to cover our living expenses so we don’t have to work. Therefore:

• Build alternative income streams
• Increase income from each stream
• Reduce living expense

Take it a step further…

• Build alternative income streams
  • Invest money in the stock market
  • Invest in side businesses
  • Pension
  • Social Security
  • Other
• Increase income from each stream
  • Learn how to invest, choose the right investment for your risk tolerance level, etc.
  • Take different actions to improve your business profitable revenue
  • Call your ex-employers to collect pension
  • Wait longer to collect Social Security. Social Security pay increases if you wait longer before you collect, but this also leave you with fewer years to collect.
• Reduce living expense
  • Eliminate debt — this also eliminate all the interest payments
  • Frugal living
  • Lower cost alternative to products and services that you need

There you have it, the basic principal of turning high-level goals into productive actions.

This article was featured in:

• The 1st Carnival of Financial Goals - 2008 Resolutions Edition hosted by Cash Money Life. For more information please visit the Carnival of Financial Goals.