by When you hear the phrase “goal setting” what comes to mind?
Unease?
No!
Goals aren’t necessary!
Oh here we go again.
You may have set a goal in the past and it didn’t work. You may have also set goals and totally crushed it.
What we want you to be open to today is not just setting goals but goals with actions associated with them.
What do we mean?
If you set a goal of “$1 million in retirement” and yet change nothing…that’s not goal setting that’s wishing.
Let’s take a quick journey on setting goals. If you search “goal setting” on amazon you will get 8,000 results. Why do we bring this up? We won’t be able to comprehensively tell you everything about goal setting today however we hope to get you started in the right direction.
Our goal today is to motivate you and pump you up to set a goal and some actions to get toward that goal.
Today we will focus on setting a long term goal. We define long term as 10+ years out.
Why?
We have discovered over time that long term goals scare people the most. In fact it scares them to the point they choose to take no action. No action leads to years of in-action and disappointment. Years where you haven’t made progress.
Today we take a small step to change all of that.
Step 1: How many years out Is the goal?
The first step is where people really start to bog down. They start to say phrases like the following:
- I have time if it’s that far out.
- It’s too long, why should I start!
- Who knows what will happen between now and then?
Here are some phrases we want you to replace those thoughts/feelings with:
- Time is going to happen anyway I would like to accomplish something along the way
- I might be able to shorten that time frame down if things improve on my original estimate
- I have seen/heard others do the same thing I can do
After adopting this new mindset we want you to determine how far out the goal is. Make an initial goal of how far out. Don’t worry about how much money you need right now that happens in step two.
To attach an example to this let’s say you have a child, young cousin, or some child you want to help go to college. They are 5 now and you want to help them when they go to college at 18.
You have a goal that is 13 years away.
Step 2: How much do I need to accomplish this goal?
This step can be another hurdle where folks bog down. They aren’t sure how much they need so they select in-action over action.
We want you to take action!
Revisiting our goal from step 1 where it’s helping someone attend college it’s a good idea to know how much college is going to cost 13 years from now.
We go to Google and do a little searching. A simple phrase like “cost of college calculator” yields tons of great solutions. We found a college calculator.
We don’t even have to plug in numbers. We just select some choices from drop downs.
Based on our choices of wanting to cover 35% of the bill the calculator estimates that we need to have $61,008 on hand in 13 years.
At this point many give up. They say phrases like:
- That’s more than I make
- I can’t possibly save that much
- Just forgot about it
All we want you to say is “it’s possible” and move on to step 3. What we promise is that by setting goals, even if you miss them, you will end up farther than not setting them at all. So let’s keep grinding it out and see where we land.
Step 3: How much would I need to invest annually for this goal? What does that work out to monthly or annually?
Most individuals at this point look at that $61,008 number and work backwards.
- 13 years – $4,692.92
- Monthly – $391.08
One of two things happens. They go “that’s just too much” or they dig in and figure out how they can get it done.
A challenge with working backwards is it’s often done with the assumption that you are saving 100% of the money. In other words you are not investing, you are only powering the savings with your hard work.
That can make things even harder and more discouraging. Leveraging the power of investing your money over just saving can reduce what is needed.
For that we visit our friends over at Vanguard and take a look at their college calculator.
Let’s say you decided you had $205 a month to save. You know that’s what you can afford to invest. On working the math backwards you believe you will save only 50% of what you targeted.
Let’s see how it works out!
What we discover after plugging things into Vanguard is that the $205, over 13 years, has the opportunity to grow. Vanguard is predicting you will have 100% of the $60K goal that you targeted.
How is this possible?
- You took action
- Compound interest
- Time…starting early is your best ally
Set a Goal and Take Action
Today we hope you start taking action on your future goals. To keep it simple we recommend the following:
- Start with three goals
- One short term, one mid time goal, and one long term goal
- Write all three down and write one action item you can do today to start working toward those goals
Share your goals with us! We want to know and be part of the support group that pumps you up and roots for you!
Twins Rules for Financial Success
As with all of our content here we want to encourage you to follow three core rules :
- Have an Emergency Fund/Squirrel Funds
- Invest for the Long Term
- Invest Automatically & Consistently
