I realized that in my blog and almost every other financial blog, everyone is telling us to make goals, stick to our goals, evaluate our goals, but how do we make goals?
In this post, I attempt to breakdown the process of thinking about financial goals.
- Create a monthly even annual budget
- Live within your means
- Pay off any debt
- Set up an emergency fund
- Contribute to your retirement funds/ start a retirement plan (even if you are in Zimbabwe!)
- Visualize the life you want
- Do work that keeps you happy (when possible – sometimes we just have to do what have to do)
- Spend on what you like
- Cut out any expenses that waste your money and do not bring you joy
- Make charitable giving an integral part of your financial goals
I think about money as a vehicle for living the life that we want. A wholesome, happy life of giving, traveling, and doing the things that bring us (me) joy.
Before we get down to business, I would suggest doing a visualization exercise. Close your eyes and think about the life you want, where you want to be, and what makes you happy. Maybe when you close your eyes, you see a beautiful house, your parents with a car, a million dollars in your retirements account. It doesn’t matter as long as you are honest. I daydream a lot- my therapist says this is healthy. So there you go- I just saved you $150.
Build your budget – we now write down our budget, so do this. This is worth repeating at every turn.
Think about what you want – what are your five-year goals? Where do you see yourself in ten years? Thinking through these questions is how you come up with short and long term goals.
Your fixed goals should include living within your budget, paying off debt, setting up an emergency fund, contributing to retirement and saving at least 20-30% of your income. After that, the goals you make are entirely dependent on the kind of life you want to live.
- If you are a student, you need to regularly set aside a small nest for after graduation to cover trips to visit friends, to support the family and additional health expenses (we have to talk about the cost of dental care -yikes) that might come up.
- If you have just started working you may need to furnish your home, get a car and or you may be thinking about settling down, etc
Our financial goals change; this is perfectly normal. Do not stress when you find yourself needing to adjust some plans. Life changes, things happen, pause, assess the change, breath, and embrace the change.
Do I need big purchases? What brings me the most joy? How well do you know yourself?
My husband and I are in our early 30s, so everyone we know is continually asking us if and when we are planning to buy a house. We also get asked a lot if we are planning on getting a new car. And about kids! I am not a minimalist or even planning to retire early, but I value financial independence.
- What is keeping you up at night? The things that keep us up at night should be at the top of our financial goals. For a while, debt was keeping me up at night – so I came up with a strategy to pay it off and exclusively focused on that. Then organizing things for my mom was stressing me for a while, so I researched what I needed to do and dealt with that. Owning a house and or a bigger car has never kept me up at night, so it is not part of our immediate goals. What do I need to be happy? What kind of living situation would make me happy?
We would love to buy a house in the future (Because Boston- seriously who can afford a house here?). We have learned that I hate commuting – I loathe it, BUT my husband prefers distance between home and work. As a result, as we are thinking about home purchases, I might have to give up my dreams of a big yard for a home walking distance to work. Houses closer colleges tend to cost more money. We also have to be realistic about the timeline. It is a lot better to save at least 20% for a down payment. We also have to think about the various hidden costs associated with homeownership. Once you have considered multiple things, you can be honest with yourself about how much house you can afford and how long it will take you to raise those funds. There is no competition, so do what fits your budget and your goals.
We are all different: I love traveling. You love gadgets. She loves yoga. He loves driving a nice car. They love buying a lot of books.
I believe that money should enhance our lives. Access to cash should allow us to do the things that we love. Look at your budget – if you tend to spend $500 on books a month then think about how you can cut out the things that do not bring you joy and think long term about the things you love.
If you are not passionate about cars like me, then you can buy yourself something functional that you pay less for. My car is a 2000 Toyota. I have kept it well, and it gets me from point a to b. Since I live walking distance to work, I hardly drive. Everything I need yoga, church, groceries is within walking distance or a two-mile radius. If I bought a pricier car, I would end up spending a lot on insurance for no reason.
I have a friend who loves gadgets. They spend almost nothing on clothes and save for the newest iPad or headphones (I have tried out fancy headphones – and let me tell ya, if I weren’t cheap I would get me some beats- also dear husband if you are reading this my birthday is today). On the other hand, I have had the same phone since 2014, and before that, I had last bought a phone in 2009. If it works, why change it. I like reliable brands that I can keep for a long time.
Do not spend money on things you do not value – that bring you no joy. I have stopped going to Marshalls because I would end up buying a lot of things that I hardly wear. I now buy clothes on a need to basis from brands that I like to wear.
I love traveling and going on vacations. I save for that and find ways to get to beautiful places within our budget. When we travel, I like to do touristy things – my husband would be fine sitting on a balcony with a cold beer, but he is a good husband so follows along with my plan.
Here are some of the top savings account options for your emergency fund.
I loved reading Dave Ramsey’s snowball method for paying off debt
Brainstorming life insurance