“I want to retire with 1 million dollars by 2040”
“I want to save $120,000 to put towards a house deposit”
These are some examples of common long term financial goals.
It’s all very well and good to have long term financial goals, but having such large and distant goals can make things seem unlikely.
There is a saying that goes along the lines of “we overestimate what we can achieve in a day, and underestimate what we can achieve in 10 years”. I think this is extremely true. Every time I look back 5 years I am surprised at how far I have come.
I think a lot of us give up on long term ambitious goals because they seem so far away and unachievable.
Setting mini goals
One of the keys for me in staying motivated to reaching our financial goals has been to break down our large long term goals into shorter term mini goals.
We will use the example of someone starting off from zero and wanting $500,000 in 20 years. On its own it may seem a large goal. But broken down it may seem much more achievable and REAL.
The more real you can make your goals, the more chance you have of sticking to the plan.
In this example we could turn our 20 year goal into 20 x yearly goals:
Year 1 – $7,000
Year 2 – $16,000
Year 3 – $26,000
Year 4 – $38,000
Year 5 – $51,000
Year 6 – $67,000
Year 7 – $84,000
Year 8 – $103,000
Year 9 – $123,000
Year 10 – $146,000
Year 11 – $171,000
Year 12 – $199,000
Year 13 – $229,000
Year 14 – $261,000
Year 15 – $296,000
Year 16 – $334,000
Year 17 – $375,000
Year 18 – $419,000
Year 19 – $466,000
Year 20 – $517,000
If you hadn’t set these mini goals and saw after 10 years (half the time) that you had just $146,000 (only 30%) saved you may be disheartened and give up. I mean you’ve only saved 30% of your target in half the time.
But because we’ve set yearly goals we know that we are not actually behind target. We are on target. The second 10 years we can achieve much more due to compound interest having a greater impact on larger amounts.
Final Thoughts
So the key is to just start. Time is your best friend.
Annual financial targets make long term targets much more real. They provide me with the knowledge that I am on track and the motivation to continue knowing that I am hitting my targets.
When you hit a target it feels good. These are the victories you need to enable you to keep going for years and years and years. Find any victory you can.
Most of us know we need to save money. The challenge is remaining motivated during the extremely long road to building wealth.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here