What is a goal? By definition, a goal is the object of a person’s ambition. Up until recently my family didn’t have any financial goals. As we discussed financial independence we quickly realized that we needed to establish a few goals so that we could be successful.
One of the first things that my wife and I had to do as we started our path towards financial independence was to begin setting goals. Up until this point in our marriage we had never actually defined any clear goals. Generally we just agreed that we needed to save more money and left it at that.
The problem with this mentality was that we weren’t working towards anything so we never achieved anything. At the end of every year we did see an increase in our savings but we always felt disappointed. The worst part was that we went through this every year and never made any real changes.
Why didn’t we make any changes? To be honest, it was because we were content. We thought we were doing things right and by all account we were. We had an emergency fund, maxing out 401k, contributing to Health Savings Account (HSA) and so forth.
Starting in the fall of 2016 I had some family circumstances that made me give this a second thought. The circumstances brought some perspective to my life. It was then that I realized that financial independence doesn’t have to start at the retirement age of 62 or 65, it can be whenever we want.
At this point we started making some small changes to our lifestyle. This included cutting expenses on things such as eating out, began moving money over to our brokerage account, and most importantly we started discussing goal setting.
It wasn’t until January we decided on the following goals for 2017.
- Create and use a monthly budget
- Set a goal for how much after tax money we wanted to save for the year
- Increased amount of money going to all savings accounts (ours and children)
- Started contributing to IRA – max it out
- Increased money going to taxable brokerage account
- Increased contribution to our HSA – This grows tax free and will be important when we reach financial freedom as it will help cover medical expenses
- Began saving the company stock that we get each year (will help fund items such as college for the kids)
These changes may seem small and insignificant but that is how the road to financial freedom starts. In addition by setting goals we can easily measure how we are doing and this will help keep us motivated.
To show the power of goal setting we typically saved about $31,000 a year before we set our 2017 goals. This was spread between our taxable and non-taxable.
Now that we established goals, we are on pace to save about $66,000 between all of our taxable and non-taxable accounts. That is more than double!
So you tell me, are financial goals important?