NerdWallet: Are you picking the wrong money goals?

Setting smart, achievable goals is important if you want to take charge of your financial life. But many of us are surprisingly bad at choosing the goals that actually matter most to us.

Investment research firm Morningstar had 318 people write down their top three financial priorities, then showed them a master list of goals prepared by the researchers. Three out of four investors changed at least one goal after seeing the master list, and one out of four switched their top priority.

"We were like, 'Wow. People don't really know what they want,'" said lead researcher Ray Sin, behavioral scientist at Morningstar.

Other behavioral research has shown even when people think explicitly about what matters to them when making decisions, they overlook many of their most important goals. That interferes with their ability to evaluate their choices and consider alternatives.

Among the problems: We're better at thinking short term than long term, Sin said. Plus, we may overvalue goals currently on our mind.

A renter who just attended a housewarming, for example, might say her top priority is saving to buy a home. She may forget she really wants to be able to quit her job and travel the world for a year. She probably has other goals as well, such as retiring someday and perhaps starting her own business.

Of course, all those goals may matter to her, but "resources are finite," Sin said. That's why prioritizing is so important. Someone determined to retire early, for instance, may not be able to fully fund a child's college education or leave an inheritance.

If you want to check for your own blind spots, quickly write down your three most important financial goals. Then look at Morningstar's master goal list and see if you want to change what you wrote:

• Be better off than my peers
• Pay for personal self-improvement (e.g., go back to school, learn a skill)
• Experience the excitement of investing.
• Start a new business.
• Buy a house.
• Help pay for my kids' college education.
• Stop working and do something I love.
• Go on a dream vacation.
• Relocate in retirement.
• Care for my aging parents.
• Give to charity or other causes I care about.
• Feel secure about my finances in retirement.
• Feel secure about my finances now.
• Leave an inheritance to my loved ones.
• Retire early.
• Pay for future medical expenses.
• Avoid becoming a financial burden to my family as I grow older.
• Manage my debt.

Something you may notice about this list: Many of the goals involve feelings. Goals resonating on an emotional level can help people maintain the discipline they need to stick with a financial plan, said Ryan O. Murphy, head of decision sciences at Morningstar Investment Management.

"When it starts to become more emotional, it becomes more personal," Murphy said. "This abstract thing of 'save more money for later' may not be a goal that really gets people to move now, today."

Even the goals that don't seem emotional, such as managing debt, can be transformed into something more powerful if you consider the feelings around them. Paying down debt can make you feel more comfortable and secure and less stressed, for example.

Morningstar researcher Samantha Lamas, a recent college graduate who just started paying her student loans, has firsthand experience with goal blind spots. Lamas initially thought paying off her debt was her top priority, but during the study realized saving for retirement was important as well. Accelerating her student loan payments might have meant missing years of company matches, tax breaks and tax-deferred compounding she can get from contributing to her retirement accounts.

"I no longer think of my financial goals as a zero-sum game where I'm forced to either save for retirement or pay down debt," Lamas said. "I can achieve both, simultaneously, if I'm thoughtful about it."

This column was provided to The Associated Press by the personal finance website NerdWallet. Liz Weston is a columnist at NerdWallet, a certified financial planner and author of "Your Credit Score." Email: lweston@nerdwallet.com. Twitter: @lizweston.

RELATED LINK:

3 steps to pay off debt http://bit.ly/nerdwallet-pay-off-debt