As I talked about two weeks ago, I am making some pretty aggressive financial goals for 2014. While they are ambitious, the quantity of goals is limited to just 4 so that I can stay focused on them and not get distracted. It’s easy to get distracted and so that’s why I’ve chosen to focus on just four.
Who would have guessed that 4 goals would be so hard to complete. For those who didn’t read my last post or those with a bad memory, here’s a brief recap of what I hope to accomplish in 2014:
- Contribute $11,000 to our Roth IRAs (maxing them out)
- Save over 10% of my wife’s income in her 403(b)
- Save $20,000 more towards our future home down payment
- Increase our Net Worth by 30%
While this may be really easy for some to accomplish, my wife and I are going to have our hands full as we try to tackle these challenges. Before I jump into how we are going to do it, let’s first expand on what these goals actually mean on a monthly basis.
Simplifying Our Goals: Doing the Math
Abstract goals do not help you. Many people say that they want to lose weight or save more money this year, but that is going to be hard to measure. In the same way, sometimes large goals or savings targets are so big that they paralyze you. Looking at these goals, it’s only natural to add up how much money it will take to accomplish these goals:
$11,000+10%+$20,000 = ??
While I won’t reveal how much the 10% is because I always protect keep our day job salaries a secret, it’s obvious that we need over $31,000 to accomplish our goals. Since my wife is already contributing 10% before taxes to her 403(b) and we don’t see this money, I’ll focus on the other two goals. I’m also choosing to ignore the net worth goal at this time because if we focus on saving money, the net worth will take care of itself (along with some help from the stock market). It’s good to keep track of throughout the year to continue to monitor our progress, but I am going to focus on the other two first.
I need an extra $31,000 to accomplish these two goals.
Wow. That sure sounds like a lot. It not only sounds like a lot – it is a lot.
Do you understand what I mean by PARALYZING now? Looking at the big number, I can’t even start to answer how I will reach these goals.
That’s where focusing on a monthly basis will be helpful. If I need $31,000 throughout the entire year, how much does that equate to per month?
$31,000 / 12 = $2,583.33
I don’t just need to make $2,600 per month to reach my goals, but I need an extra $2,600 each month. Not just one or two months, but every single month.
This is why it’s helpful to plan out how you are going to reach your goals. When I look at this number and pay attention to our increasing costs (since we just moved to a more expensive location), I’m initially doubtful that we will reach our goals without additional raises or income.
Is it Time to Give Up on My Goals?
My first gut reaction is to give up on my aggressive goals for 2014. But, that’s not what I’m going to do.
If goals were easy to accomplish, they wouldn’t challenge you.
So, how do I make the impossible possible? Here’s my plan…
1 – Minimize our voluntary spending
My wife and I are not the type of people of people to spend a lot of extra money. We buy what we need, and when there are things that we want, we talk it over and make sure it’s worth our money.
But, since I have seen how hard it will be to accomplish our goals, it’s time to push ourselves just a little bit more. I don’t think we will go to the extreme, but it doesn’t hurt to try a little bit harder.
2 – Earn Extra Money
We have a two pronged-attack to earn a little extra money. My wife and I are hoping that she will get a promotion with a raise in the summer. It’s been long overdue and she’s good at what she does. She just finished her Master’s degree, so her resume is bursting at the seams, so to speak. But, we’re not depending on this.
I’m also working on this blog in my extra time to earn a little extra money. It’s not a lot, but it adds up over time. Between this and continuing to make ourselves more valuable to our employers, I think we have a bright future ahead.
Don’t Give Up On Your Goals
I guess when I stop to think about it, I do not have a definitive plan to reach our goals. As I mentioned, goals are supposed to stretch us. If I could easily come up with a concrete plan to earn this extra money, it wouldn’t be a challenge. What I do know is that it will take both reducing our spending and earning a little extra income.
This is the secret to financial success – a two-pronged attack. Even someone who earns a million dollars in one year and spends it will have trouble reaching his/her goals. The same is true for someone who earns very little money. No matter how much they cut their spending, they won’t be able to save much if you earn very little. You don’t have to earn a lot, but you have to make progress in both areas (income and expenses).