I talk about long-term financial goals a lot. I’m sure some people (namely my wife) have had their fill and don’t need to hear me talk about retirement savings ever again.
But I just can’t help myself. I’ve seen the benefits of planning for the long haul and I want to see more people set themselves up for success. Few things reward like watching hard work pay off, and that’s why I’m so enamored with long-term money goals.
However, I also see the importance of achieving in the short term. Sometimes it takes a little success in the early going to convince people of the importance of long-term financial planning. This post is for the newest generation of working-class investors; those who either don’t have time or aren’t yet concerned with planning 20 or 30 years ahead. If you can’t imagine thinking about your money past next month, let alone next year, these are some goals that might work for you.
Bottom line: I want you to have objectives. If something listed below doesn’t make sense to you, tweak the concept and make it your own. Either way, you need to set financial goals and force yourself to stick to them. If you do, you’ll eventually see why I get so excited about planning.
Realistically, accomplishing this goal takes a fair amount of time. When your student loans dwarf your annual earnings, there’s no quick or easy solution. However, there are immediate steps you can take.
Right now, cold turkey, stop taking on more debt. That means stop swiping your credit card for every purchase, stop using consumer finance to allow for monthly payments, and stop wanting things you can’t afford. If you have to buy it on credit, there’s a good chance you shouldn’t be buying it.
Debt begets debt. Most people who consistently owe money are consistently borrowing, and they see that as the only way to stay afloat. You can stop the cycle, you just have to commit to ending your dependence on credit cards and loans. If you’re making massive car payments, trade in your car for a cheaper model; if you have a dozen services on recurring billing, cancel a few of them until you get your head above water. Lots of luxuries seem like necessities until you eliminate them. Once they’re gone, you’ll probably feel like a huge weight has been lifted.
Let’s say you have $50,000 worth of debt spread across a car payment, a small loan and several credit cards. $50K looks like a lot of money to pay down in one go, and that can be fairly overwhelming. That’s why you need to think about the balances individually and take care of them in stages.
People use different tactics when deciding which debt to tackle first. Some opt to go after whatever has the highest APR first, while others prefer starting with the smallest balance. I see merit to both philosophies, and I encourage you to do whatever feels best. It makes sense to get rid of debt that’s accruing the most interest, but there’s something to be said for completely eliminating a smaller amount of debt so you can see the fruits of your efforts.
With your debt organized, you can formulate a plan. Start strategically paying down balances, and you’ll start seeing results. As your debt goes down, so do your interest payments, and before long you’ll gain momentum and the debt-free finish line will be in sight.
As fun as it is to treat yourself when you bring in a little extra on a given month, it’s much more enjoyable to feel financially secure. It might feel like you need a day at the spa or a weekend away, but your financial goals are much better served if you put that money toward debt reduction. This will be tough in the early going, but once you start seeing your credit card balances dwindle, you’ll probably start enjoying the process and get excited when you’re able to pay more than normal because of a boost in earnings.
With lingering loans, it’s much harder to achieve your other financial goals. If you start attacking your debt right now, it won’t take long before you start seeing progress in numerous categories.
You’re probably thinking two things: A) that’s not a lot of money, and, B) how? Those are both perfectly acceptable thoughts, and I will be happy to address them for you.
$10 a month is not a lot of money. It’s $120 a year, and that still isn’t very much. But here’s the thing - money tends to grow when given the chance. If you put money to work through the appropriate investing channels, you’ll end up with more than you had when you started. What are the appropriate channels for $10? Hard to say, but you can’t even start that conversation until you’ve earned the money.
Also, who says you’re going to stop at $10 a month? If it only takes you eight days to earn your first 10 bucks, what’s to stop you from earning another 10 or 20? When you set an easy financial goal and achieve it, it can motivate you to set and achieve another. Of course, the opposite of that is also true - if your financial goals are unattainable, discouragement might cause you to stop trying altogether.
Now to the second half of this equation, which is how to go about earning an extra $10 each month. For those starting from square one, answering this question is pretty tricky. If you had to earn a few dollars and you only had a few hours, where would you start? Who would you call? What would you sell?
The hardest part of creating a new income stream is wrapping your mind around a new method of earning. Most of us have been trained to work for a paycheck, to earn an annual salary, to climb the ladder and work toward a six-figure income. A tiny boost in cash flow that’s unrelated to our current occupation can seem unattainable because it exists outside our typical mindset. However, as soon as you create and sell something on Etsy, or move a dresser and get paid through TaskRabbit, you start seeing a new world of earning potential.
There’s an erroneous belief that wealthy people only chase after big fish. That may become true at a certain point, but anyone who has paved their own way started by making the most of what they had, even if that was very, very little. If you view an extra $10 each month as an insignificant amount of money, you have to change your perspective; instead of comparing it to a bigger quantity, compare it to the amount you had before. It doesn’t matter how much is in your bank account, having $10 is always better than not having $10.
Welcome to the most boring goal of all time. Your mission, should you choose to accept it… is to dine out less this week.
This is not a glitzy goal. Curbing spending is not something you can easily brag about when talking to coworkers. However, if you don’t make it a primary objective to tighten your purse strings, there’s a good chance you’ll never learn to cut back. I mean, if it was easy to reign in spending, don’t you think more people would do it? Wouldn’t Americans have a few billion dollars less credit card debt?
It needs to be a goal, and it should probably be the first goal you set. I started with reducing debt because that’s a more definitive objective, but curtailing your clothing budget and going to fewer movies will play a big role in how quickly you can meet other financial goals.
I doubt any of this is coming as news to you. So, how do you actually go about setting and achieving a spending goal? Let’s see if we can figure it out.
As with most things in life, nothing gets done without some form of motivation. Financial goals are the same as fitness goals, in that you can only achieve them when you feel inspired to work hard until you see reward.
In terms of spending less, there are lots of ways to make this a competitive focus. First, you can reward yourself when you meet a savings goal. Reduce your cable bill by X number of dollars, put Y number of dollars toward a new pair of shoes (provided Y is not greater than X, of course). Would it be better if you just saved money on your cable bill and put it all toward debt? Absolutely. But if it takes treating yourself to cut back a little, that’s the way you’ll have to operate.
For those who get really into number crunching, do the math to see how long it would take to pay off one credit card if you only paid the minimum each month. After that, find out how much the monthly expense would go up if you tried to pay it down in half the time. With that timetable and monthly amount set, see where you can cut spending in order to reach that goal. If you create this type of roadmap for success, you might become more motivated to stop your non-essential spending.
Eliminating something enjoyable from your life is never easy, and it’s not always reasonable to expect that from yourself. In many instances, however, the thing you love can be replaced by something that’s almost as good. Your brain will fight you with complaints like, “It’s just not the same!” But your brain can’t always be trusted.
Take your gym membership or yoga class for example. I definitely don’t advocate that people exercise less, but it seems to me there are a lot of ways to get cardio for free. Try running, biking or swimming, or pay a little for a yoga mat you love and watch training videos at home. Once your debt is gone and you’ve earned the right to pay top dollar for your fitness classes, you can resume. Until then, don’t lie to yourself about what’s a want and what’s actually a need.
Cheaper substitutes exist for just about everything, from what you eat to what you wear. Before you rule out inexpensive items, deciding they don’t meet your standards, give some of them a try. There’s a good chance the only difference you’ll see is less money flowing out of your bank account.
It’s difficult to quantify, but you’d be surprised how much extraneous spending results directly from lack of planning. All those last minute trips to the grocery store for a forgotten item, or eating out because you left your lunch at home. These moments are just blips on the radar in real time, but when you add them up and look at this type of spending as the sum of all parts, you’ll see a lot of money being spent needlessly.
You can’t plan for the unexpected, but the more focused you are through your daily routine, the fewer snags you’ll hit along the way. Try planning a week’s worth of meals in advance, and try to be conscious of the gas you’re using when you plot out your route for a day of running errands. Stock your desk with snacks so you’re less tempted to buy food on your lunch break. If you’re getting a drink with friends, see if you can schedule it during happy hour when things are cheaper.
If you’ve read this far, you care about setting financial goals you can actually stick to. If you care that much, you should be able to put a little extra time into planning your day.
The emergency fund is a real point of contention for some people, and I completely understand why. When you’re living paycheck to paycheck, the idea of having a few thousand dollars set aside seems absurd. “How can I save $6K when I struggle to pay rent each month?” That’s an entirely valid question, and it’s not a particularly easy one to answer.
Here’s the deal - even if you’re in debt, struggling to make payments and generally feeling traumatized by everything that relates to money, you still need an emergency fund. In reality, having money set aside for the most dire of circumstances eases the burden of your other financial hardships. Building this rainy day fund takes effort, but so does everything else on this list; you’ll just have to commit and then thank yourself later.
This is the last of the financial goals I’m listing because it’s a little dependent on your other objectives. If you’re in the processing of paying down debt and you don’t have anything in your emergency fund, you have to try to find a compromise between those two efforts. If you have debt, it’s hard to put money in savings, but if you don’t have savings for when things go wrong, you’ll probably end up back in debt. It’s a real catch 22, but it’s a fight you can win if you set a responsible budget and stick to it.
Once you have enough money set aside to cover a few month’s expenses, you’re done. You get to focus all your efforts on debt, and if that’s taken care of you’ll have a lot more freedom to spend and invest and feel much more comfortable with your money.
Your emergency fund is like any type of insurance - you don’t need it until you need it, and then you really, really need it. It takes a lot of determination and foresight, but it’s definitely worth it once you commit to creating the fund.
You should always have financial goals you’re pursuing. I’ve accomplished a lot of goals over the years, and I always replace them with new objectives so I stay motivated. If you feel like anything on this list is too difficult, it’s probably because you need to rethink how to go about achieving it. Make your financial goals as big or small as you need them to be, whatever it takes to create the motivation that will spur you into action.
If you need help setting your own financial goals, please reach out. And if you have stories of goals you set and achieved, I’d love to hear about those too!