- When we first started on this journey, our goals were not well defined. As a result, we did not know where to start and we had a limited understanding of how participating in a particular investment vehicle was (or wasn’t) going to help us achieve our objectives. Our goal was initially to have “financial freedom.”
- One day James and I had a “planning session,” where we discussed and agreed on our key objectives for both the short and long term.
- How could you plan for financial freedom if you don’t know what kind of goals or lifestyle you want?
- While no one is a fortune teller (okay maybe a few people are this..lets exclude them from this conversation), you should have specific goals in mind. If you have no specific goals that you are targeting, then you will be investing randomly in different financial products without knowing whether it is helping you get closer to your goals or not.
- The first step in coming up with specific goals is to break them by timeframe; what are your:
- Immediate Financial Goals (in next 1 year)
- Short term financial goals are ones to be achieved in up to 3 years
- Medium term financial goals are one to be achieved in 3-7 years
- Long term financial goals are to be achieved in 7 to 10+ years
- Now that we established timeframes, when describing your goals, they should be:
- S = Specific
- M = Measurable
- A = Achievable
- R = Relevant
- T = Timely
- For example, your goal should not be “I think I should have a big house in future.”
Reframe that goal to say “I want to buy a 3 bedroom, 2 bath house in Miami, Florida for about $350,000 in the next 3 years.”
The difference is clear.
- This goal has all the elements mentioned above. It is:
- Specific: It is clear what type of house is to be bought where
- Measurable: It is not using general words like ‘big or small’. It’s a 3 bedroom, 2 bath, etc.
- Achievable: Of course its achievable. We are not planning to buy a mansion here.
- Relevant – It is relevant for the person who has this as goal. It is what you want.
- Timely – A clear deadline is set to achieve the goal.
- Goals tell you where you want to go. And it is only when you know where you are headed, you can decide what path to take.
- Having several goals does not increase your chance of achieving them. It is better to focus on fewer goals instead to get the best result. Your income and time (for all intents and purposes) is limited and you want to use it to save (and invest) for the most important goals.
Our Challenge to YOU:
Write down your goals (no laptop / phone) on a sheet of paper/post-it notes (don’t call me old school please) and tape it on a wall. If you happen to have a whiteboard at home, then write them down there.
The objective here is that you should see (literally) your goals every single day before you leave your house and when you return from work/business.
That way you are constantly reminded of what you have want to achieve and this should motivate you to start taking the appropriate actions to get there.