Goal setting is without doubt the easiest one can do.
Goal: I want to be a millionaire billionaire.
Goal set. See how easy that was?
It is far more difficult to set SMART financial goals. SMART is a common acronym that stands for: Specific, Measurable, Achievable, Realistic, and Time-bound goals. I personally have set all of my financial goals using this schema and have found great success.
So often we set goals like “making a million bucks” or dying a millionaire that are so vague and lack a purpose. Are we just trying to get a certain amount in the bank? That’s great, but what quality of life do you want? Will you be debt free? How long do you plan to work?
With all of these questions swirling around, I set out to create a SMART financial goal for each decade of my life. It is these goals that help me manage my finances with a purpose.
My Financial Goals for Each Decade of Life
Without great detail, here is an outline of my goals below:
- By age 20: Have $X-amount in my investment portfolio
- By age 30: Be 100% debt free (no mortgage, no school loans, etc.)
- By age 40: Have $X-amount in cash and work only as desired
- By age 50: Be able to invest $X-amount as an angel investor in privately held start-ups
- By age 60: Have given away $X-amount to charitable organizations over the course of my lifetime
I nailed my first goal by age 20. I had a specific date, my birthday, when my measurable, achievable and realistic goal had to be met. Now, being in my 20s, I am planning and on track to hit my milestone for my 30th birthday.
For me, planning by the decade gives you extremely flexibility to live how you want to live while still giving you plenty of time to rebound from unstable market conditions, loss of a job, unexpected expense, family growing, etc.
In talking to so many friends, I ask them what their financial goals are. So often I hear “I want to be debt free” or “I want to have $X-amount when I die.” While those are novel ideas, there is no ability to measure or track towards those goals. They are not time-bound and without being time bound and measurable, they are likely unachievable. When you set financial goals for every decade of life, you are able to make strategic decisions along the way that will help you reach financial independence and every personal finance goal you set. What goals are you going to set?