I found a great post at The World Of Wealth about the difference between projecting your progress and setting actual goals.
Take, for example, my goal of having $1,000 in my Emergency Fund by December 31. I came up with that "goal" by figuring that my bi-weekly $100 contributions to the account would total $1,000 by the end of October. I know that, barring any major changes, I will hit this target well before the end of the year. This is very different from my long-term debt reduction goal, where I have set a target of April 30, 2009 to pay off my credit card debt. I set this goal without first consulting the current rate of my debt paydown. This is actually a goal that I will likely need to make substantial changes to achieve.
This is an important distinction to make. Ideally, the process for setting goals should probably lie somewhere between these two extremes. No one wants to set themselves up for failure, so it's important that the goal be realistic. However, if it's already an all-but-foregone conclusion that the goal will be met, then it doesn't really leave anything to strive for. An effective set of goals should represent a "stretch", while still being achievable.
This is a hard balance to find. How much of a stretch is too much? How close do you need to be to your goal to stay motivated? The answer will differ widely from person to person, and also from goal to goal.
What do you think? How do you go about setting your own goals (financial or otherwise)?