It was about two years ago that I started “hard-core budgeting”. I customized my own excel spreadsheet and would track expenses to make sure my wife and I weren’t spending too much money. I felt very proud of my new financial commitment. My wife and I are pretty good at controlling our spending, so we would regularly come out ahead each month. However, one of the biggest mistakes in budgeting that I made early on is not having set goals.
Why Financial Goals Are Important
I realized that while we were coming out ahead most months, we didn’t have any specific focus or goal. We didn’t know what we wanted to do with the money that we were saving. As a result, saving money was not as important and there were a few months that our spending would go beyond our income. I accepted this because there were other months that we came out on top and we were still saving money over the course of the year.
When I didn’t have any tangible goals that I was striving towards, saving wasn’t a priority. There was nothing to motivate me to save even more money that we were saving. Even though I am a saver and always have been, I am also human. I have since realized that I need goals to motivate myself to be more responsible with my money.
Financial Goals Are Not Always Boring
When I began to set tangible goals, I realized that it doesn’t have to be something that you force yourself to do. In fact, I found setting goals to be exciting. While my wife may not share the same enthusiasm, I would always welcome creating new goals and discussing this with her. (This is actually how I got into blogging. After I started researching personal finances for a long time, I came across a blog that I now staff write for and realized that I should start blogging too. It would be a great way to communicate many of my interests.) It made me look forward to all of the things I could accomplish.
Setting new goals is exciting because it helps you realize your ability to achieve your dreams. For example, if you want to own rental properties for retirement income, setting a tangible goal of purchasing one in 5 years forces you to save for a down payment. It helps you envision yourself accomplishing that goal. As you start working towards your goal, it becomes even easier because you are making progress.
My Financial Goals
So, what were some of the goals that I established? Here are the short term goals (next 2-3 years) that I established:
- Open and maximize yearly contributions to ROTH IRA for both of us (Roth IRA Rules can be tricky, but my wife already has one so I am well acquainted)
- Start contributing to 403(b) for both of us (I’m eligible to participate starting in the Spring)
- Get Life Insurance (I may not need to buy term life insurance, but it would be nice to have some form of life insurance in case something happens)
- Increase Networth by 50% (this is easy to do when your networth is low
) - Finish Graduate School Debt Free (next December!!)
- Pay for Mrs. 20′s Graduate Degree in cash (She applied to start in January, more details to come)
- Build enough passive income to retire – Yes, I want to “retire” in 2-3 years. This is part of my early retirement plan.
There you have it. I want to maintain this open relationship with you, my readers. I hope that you can keep me accountable. I plan to share my progress on these goals (as well as share more intermediate and long-term goals soon) as time continues. I have already been working towards completing some of these and will update you soon.
What are your goals for the next 2-3 years?
*featured image provided by: Images_of_money
Those goals look good (although if your “networth is low” currently, #7 might look more like a reduction in work than full retirement).
Do you get a match on the 403(b)? If so, you should probably pop that to number 1, just up to the match, then to the Roth, then back to the Roth… that way if you don’t have enough for the Roth you at least get the guaranteed return of the 403(b) match.
Thanks – Yes, I don’t qualify for my 403b until February, that’s why I put priority on the Roth. I should be able to do both! I’m excited!
Definitely looking to max out the Roth, I also would like to save or build investments up to 20,000 within 3 years. I’ll have to do that while simultaneously paying off debt but I’m confident that I can do it.
Good luck maxing out the Roth. Knowing how successful you are online (even though you don’t advertise it), I know you can do it.
My goals in the next 2-3 years are a bit agressive. but, the more agressive the goals the better for me:
1. Buy 3-4 rental properties per year
2. Complete CFP and acquire at least 500,000 assets under management
3. increase extra house principal payments by 10%
4. match my current income with blogging income
5. If I get 1,2,4 done pay off my home within 2 years of accomplishing those goals.
Doh.. that should say 5,000,000 under management
really? Who are you. hahaha. Good luck reaching your goals. I have a feeling you are going to be a super star in the blogging world.
Very young and very ambition guy with too much time and money on his hands. Who happens to be hell bent on creating generational wealth. Nothing is cooler to me than having an estate in the 10′s of million.
well, good luck to you. Remember me in your will.
My main financial goal for 2012 is to save or donate half of my take-home income. With that amount, I can further my other goals of a debt-free wedding (fall 2012) and a debt-free graduate degree (spring/summer 2013, plus the 6-month grace period after graduation).
All cash-back rewards, bonuses, or other “free money” goes into one of three savings goals: grad school, wedding, or house down payment. Any salary raise is applied to retirement savings.
I’ve also got a few other goals for 2012, including getting rid of a certain amount of “stuff” from the apartment, volunteering more, and networking in anticipation of internship and post-grad opportunities. I’ll be blogging more, too!
And!
We’re now planning a “big vacation” — combination road trip and cruise — in 2014. Driving from San Francisco through Ashland and Corvallis and Eugene and Portland up to Seattle, staying in hostels and with friends — then a trip to Victoria and Vancouver with cruise ship and Amtrak — and flying home again. I’m not usually a happy traveler, but this is custom-tailored to my comfort levels. I’m so excited to plan this out!
Wow – retire in 2-3 years? Quite a goal!
Technically it’s not the traditional retirement – I plan to work 3 days a week. But yes, I hope to quit my day job and have enough side income coming in that I can do whatever I want with those extra two days.
My biggest goal over the next 2 to 3 years is to match the income I earn from my day job with income earned from entrepreneurial endeavors. It’s gonna be a LOT of work, but I’m up for the challenge. Life is boring when it feels like you’re standing still.
What’s your end goal for that extra income, Shawanda?
Yes, I agree. I always like to be working towards a goal. That’s a great goal Shawanda. Good luck!
I’ve maintained financial goals since my 20s, and there is magic in writing them down!! It makes them real and attainable!! Goal setting works!
Thanks Barb. Yes, there is magic in writing them down (or typing them out – haha). It seems so much easier.
Definitely go for the Roth (I love those things!!!)
There’s nothing not to love about these things!
That’s great that you started to make goals. Beyond that, I usually tell people to make a plan on how you’re going to reach your specific goal. For example, if your goal is to spend only $75/week on groceries, how are you going to do that? Maybe you can commit to clipping 5 coupons before you go grocery shopping. It’s important to take the small victories when goal setting.
I agree Kevin. That’s great advice. Yes, actually, my wife and limit our groceries to $60 a week. I do have other rough figures written down, but for the sake of length, I chose to exclude them. But, perhaps I do need to expand on this idea in a future post. Thanks.
I think it is not only not about trying to control yourself, but rather make informed decisions as well.
When we started four years ago to keep our budget, initially it was a chore, to be perfectly honest. Nowadays it does not take a lot of time.
Publishing it online for the readers, helps to maintain discipline. It goes beyond that – no we know what our core expenses, essentials which we could not possibly reduce and helps us realise how much do we need to live comfortably.
On the financial goals I had to re-think them. When you look at the recent inflation figures (3% in the USA, 5% in the UK), administration fees 2-3% and the market performance it is clear that we are keep loosing money. With no incentive it is rather difficult not to give up on savings ; -)
Figures will tell the whole story. As far as the short term goals – I am going to choose a few mutual funds and start diversifying early next year.
These are admirable goals. Best of luck in reaching them. I know you can do it. You seem to be a pretty committed and determined person.
We have been working on some of our goals lately too. One is to boost up our ER fund. It is coming along quite good which is great.
My goal is to go to business school and make a career switch. I want to earn a good salary and do work that is professionally fulfilling. Eventually I’d love to work in China or Latin America for 3-5 years, running a division. Gosh I feel so conventional compared to you all!
Also, I want to travel everywhere with my soon-to-be husband. And send my parents and my in-laws on a really big vacation.
Got some good goals there. i like the only working 2-3 days a week. My big goal by next year is being completely dependent on side income/passive income. Only working for myself. Good Luck!
Those are some great goals for the next 2 to 3 years. It’s way more than I could accomplish right now. I haven’t really thought about goals that far out aside from living in another country.
Good luck with your goals, Corey. I can’t wait to see your updates.
I was in Miami last weekend and realtor after realtor was telling me that the biggest condo building bust in history has bottomed out and is rebounding with the U.S. housing market. Buyers are snapping up properties, one-third of them paying cash, and the best deals are gone.So I would suggest on real estate and housing market
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Great goals 20sFinances. I know you can accomplish your goals. I know you’re not afraid of hardwork
Best wishes on your ventures.
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Good for you! I was a saver through my 20′s, but wish in retrospect that I had been a little more focused on the goal and less on just throwing “extra” money into an account. Very interested to watch your progress.
Thanks Lifeoverwork. I am happy to share my progress with my readers.
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Will be interesting to see you go from low networth (low enough to double!) to retirement in 2-3 years.. very exciting!
Good luck on your goals =)
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