Do you want to be a millionaire? Of course, who doesn't. That's a worthy financial goal for almost anyone. So how do you plan to get there? Are you currently on track? When will you get there? How do you know?
Imagine you're traveling to someplace you've never been before. How do you plan on getting there? With the technology available today, it really isn't even that difficult. If the destination already exists in your phone, you just tell it where you want to go and voila! Your phone will tell you exactly how to get there. You'll know what turns to take, when to take them, and almost exactly how long the trip will take. Things aren't so simple when you're trying to map out your path to financial freedom. Most people are just traveling through time, day-by-day and moment-by-moment. They have no sense of direction and no determination. They're afraid to stop and ask for directions. They spend their entire life wondering why they were never rich, but refuse to take action to put themselves on the right path. This is why it's so important to set goals for your finances.
I like to set a long-term goal and an annual goal each year that aligns with it. For instance, by 2030, I want to have a net worth of $10 million, and by the end of 2020, I need to increase my net worth by $110,000 to stay on track. These goals are great, because they have the core components of a SMART goal. Specific, Measurable, Attainable, Relevant, and Time-bound. Most importantly, they are difficult, but also possible. I want to push myself to grow and expand my capabilities so that I can continue to increase my net worth in the future. I can't save my way to $110,000. I only make $135,000 annually, before taxes, and I have normal living expenses. I can however, possibly improve the value of my current home, I can purchase a property that is greatly undervalued, I can contribute $19,500 to my 401k, and I can increase the value of this blog. Those are just a few of the ways in which I could attain my own goal of increasing my net worth by $110,000.
Now, I would love to increase my net worth by much more, but my goal needs to remain realistic. Short of winning the lottery, I don't know many ways to drastically increase my net worth within 365 days. My goal does however keep me on track for my long term financial goal of a net worth of $10 million by 2030. I know $10 million is a lot of money, but 2030 seems like a long ways off as well. I know I can also break down my goal for each year between now and 2030, and further break each of those down into smaller, monthly goals, which can continuously push me closer to my yearly goals.
I love having monthly goals, because I'm an impatient person. I want everything now, and working towards a net worth of $10 million seems futile at times, but breaking my goals down into monthly steps I can take gives me a sense of accomplishment and makes everything more manageable. Even if I have a bad day, or a bad week, it doesn't stop me from reaching my goal that month, and it definitely doesn't keep me from reaching my annual goals. When something goes wrong, or I make a mistake, I constantly ask myself, "does this prevent me from achieving my goals?" Over the past 12 months, I have never answered "yes" to that question. I know I can keep setting an achieving each monthly goal on my way to $10 million. That's why goals are so powerful and important.