Do I set annual financial goals? Kind of, in that I have a long term strategy and my savings goals aren't elaborate or anything and much of it is just adding something, anything, to existing savings categories like vacation, home maintenance, etc.. I've got a notebook going back some years where I note my annual costs, spending, budgets, and set some goals based on life choices (e.g. kids graduating college) and just see if the things I'm spending money on make any kind of sense. I tend to check or update it every six months. My basic financial goals this year are:
- To get out of debt besides the mortgage and stay out through retirement.
- To up our retirement savings by another percentage point to 18% of salary excluding matching.
- To up our personal savings once the loan is paid out by taking that loan money and stuffing the majority of that payment into our money market.
- To up each paycheck personal spending allowance amount for me and the spouse by $5. (Can we party or what? :-)
- To up each paycheck joint account with the kids by $5 (I'm absolutely spending nuts, I know :-)
- By doing most of these I expect to achieve a goal to have around $100K in taxable accounts before I pull the plug on the nine to five in four or five years. That is in addition to probably $10-15K in anticipated home maintenance and improvements over this time.
Education wise I signed up for some Elder law and estate planning classes through the community college. I got two sessions in on one class before cancelled due to COVID-19. Maybe I'll complete next year year if they have them, they were interesting and you find even with reading a bit that there are always tidbits to learn especially about the state you are living in that many general articles or books can't cover. There are other classes I will likely take, being fully aware they are there to drum up some business for themselves, I don't mind and learn what I can.
Finally, two definitive points I strongly suggest to most people. First off, save some money for fun, whatever your version is. I put away into a vacation account and every two years or so the spouse and I travel somewhere using that money. When the kids were smaller, I put money into savings for nearly two years before we did Disney and again before we went to Europe. In both cases the total trip wasn't completely covered, and we had to pay off some credit card debt, but not even a quarter of the totals. Next is don't discount squirreling small amounts of money away, because nine times out of ten the biggest hurdle is taking the effort to set up the account or pathway to save or invest. Once you have it, often it's nothing more than a quick adjustment to add to it, be that changing your 401K from 5% to 6% or your allowance into an account from each paycheck from $50 to $55 dollars for this year. If you commit to adding yearly, or every time you get a raise, or better, both, before you know it you are saving something significantly substantial but you notice your life isn't being crippled by it and you start adding more because it doesn't "hurt" the way trying to jump in and save 10% or $400 a pay would right off the bat, so you don't avoid it. The people who will look at the $25 a pay you started saving for college for your kid when they are born and laughing about how that'll never pay for college aren't the ones committing to adding $5 or more each pay every year or every promotion or both so that by the time the kid is 18 and ready to go you are saving $120 a pay with thirty thousand in the 529 and even if it won't cover all the costs it sure beats the nothing they likely saved.
Budgeting today is certainly different than how we budgeted a decade ago. We meet our investment and savings goals today with a surplus and then spend/invest thereafter.
I started a spreadsheet and our first real budget in 2008, but my personality didn't allow me to stop at just a budget. I digested thousands of hours worth of information about personal finances for the next 2-3 years. Consuming Dave Ramsey & Ric Edelman podcasts (among others), listening to dozens of financial/self help/business audio books and joining Bogleheads.org, Reddit forums, and NetworthIQ --> NetworthShare.
In 2009 I create our first "goals" section, but the spreadsheet has the following tabs:
· Overview Section (basically the profile view of NWS)
· Chart of Assets vs liabilities over time
· Goals Tab for each year
· Dividend Income per year (divided out between taxable and non-taxable) with YOY increases
· Milestone estimates (Forecasted through age 65 including inflation adjusted numbers)
· Milestone dates of Net Worth by $100k increments
· Year over Year Increases in 1) Net Worth 2) Income and charted out
· Earnings by year and job including proration for raises and notations of when those occurred for reference later in life.
With that said, here is a sampling of our goals over the last decade.
In the early days goals were specific:
1. Create an emergency fund of 3 months
2. Save $1,000 and open IRA's
3. Pay down debt
Additional years retained the original goals and the list grew with less specific "must achieve":
1. Plan and research X vacations for the year and save $XYZ for them
2. Net Worth increase of X
3. Savings Rate of Y% of income
And finally became a "to do-ish" list once we started a family (6 years ago):
4. Hire CPA
5. Shop Insurances
6. Find an estate planning attorney
7. Setup Disability & Life Insurance (independent from any provided by employer)
8. Research Daycares
9. Start 529's
Lately, I've morphed the goals section to less financial (those goals still exist for the year) and more educational.
10. Expand my knowledge of options
11. Get a Ham Radio License
12. Build a New PC
13. Research multifamily properties & land lording (optional)
The goals list now is about 15 items each year. As our income has increased ~350% over the last decade, we've been fortunate enough to lessen the intensity and broaden the horizon.
Here's to the roaring 20's!!!
edited by licid9 on 1/22/2020
Do you set annual financial goals? If so, what's your strategy?
I typically set retirement goals (max out our Roth IRAs + 10% to 401(k)), but rarely set specific $ or % goals outside of that.
For the next few months, I plan to focus on spending. We bought a house in July, and since then have been going a little crazy with little projects and buying furniture here and there, etc. Not going into debt, but not saving much right now outside of retirement. I just finished "The Year of Less" last week, and am intrigued by the idea of not spending money except on very specific pre-determined things. The writing in the book was horrible and I don't recommend it, but the idea was appealing to me.
My husband and I got married in 2017 and we have a one year old daughter. In the fall we finally met with a lawyer to do estate planning, so another of my "financial goals" is to update beneficiaries on all of our accounts. We are also in the process of setting up life insurance.
What's your plan for 2020, and why? How have your annual goals changed over the course of your life?