2662: Setting Smart Financial Goals by Sierra Black of Get Rich Slowly on Practical Goal-Setting Strategies

[00:00:00] There y'all, I'm Adrian and I just used a self-directed IRA to buy shares in my buddy's

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[00:00:06] Not your typical retirement planner.

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[00:00:20] myself.

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[00:00:53] This is Optimal Finance Daily, Episode 2662, setting smart financial goals by Sierra

[00:01:07] Black with GetRitchSlowly.org.

[00:01:10] And I'm your host and personal finance enthusiast, Diana Merriam.

[00:01:14] Now let's get right to it and continue optimizing your life.

[00:01:22] Getting smart financial goals by Sierra Black with GetRitchSlowly.org

[00:01:29] Goals are critical to financial success.

[00:01:32] We've written about them a lot here at GetRitchSlowly.

[00:01:35] In fact, one of JD's core tenets for getting rich slowly is the road to wealth is paid

[00:01:41] with goals.

[00:01:43] Not all goals are created equal however.

[00:01:46] A bad goal can sap your energy and distract you from making progress.

[00:01:51] A good goal on the other hand can provide the clarity and motivation you need to attain

[00:01:56] your dreams.

[00:01:58] What's a smart financial goal?

[00:02:01] Getting rich isn't a goal, it's a wish.

[00:02:03] A goal needs certain characteristics to have power.

[00:02:07] I like the smart goal setting system which I was first introduced to as a new hire at my

[00:02:12] one and only big corporate job back in the day.

[00:02:16] I've encountered it in a few different venues since then and always found it useful.

[00:02:21] The smart system teaches that goals must be number one specific.

[00:02:28] Remember how I said Getting Rich isn't a goal?

[00:02:31] For a goal to work, it needs to be specific.

[00:02:34] Don't just aim to save for retirement.

[00:02:37] Do your homework and figure out how much you need to save to have the income you'll

[00:02:41] want when you retire.

[00:02:43] Now you have a number and that number can be the basis of your goal.

[00:02:48] Number two measurable.

[00:02:50] Once you have a specific goal, you need to know how well you're doing at achieving

[00:02:54] that goal.

[00:02:55] I can look at my retirement accounts and see exactly how much progress I've made towards

[00:03:00] my specific savings target.

[00:03:02] The same is true with other goals like saving for a vacation or buying a house.

[00:03:07] The more specific you can be in your goal, the easier it will be to measure your progress.

[00:03:13] Number three attainable.

[00:03:16] I'd love to write and publish a book.

[00:03:19] Doing so is on my bucket list.

[00:03:21] I can easily fantasize what it will be like to hold my own finished book in my hands and

[00:03:26] display it proudly on my bookshelf.

[00:03:29] Even better if it hits the best seller list, I'll go on Oprah.

[00:03:32] I'll get a six book deal.

[00:03:34] I'll be the next JK rolling.

[00:03:37] That's not a goal.

[00:03:38] It's a daydream.

[00:03:39] My writing goals are more concrete and attainable.

[00:03:43] We build on what I'm doing now.

[00:03:45] Each time I attain a goal like selling a story to a particular magazine or being able

[00:03:50] to quit my day job in right full time, I get closer to being able to write that book.

[00:03:56] When the time comes, I'll get real specific about what book I want to write and what steps

[00:04:00] I'm taking to do it.

[00:04:02] Then it will be a goal.

[00:04:04] Number four realistic.

[00:04:07] Notice that I've talked here about my savings goals and my professional goals.

[00:04:11] You just need to be realistic and related to your real life.

[00:04:15] I'd love to walk on the moon someday, but doing so isn't a goal of mine.

[00:04:19] It's totally unrealistic.

[00:04:21] If you want to make radical changes to your life, that's fine.

[00:04:25] Goals can help you do that, but they need to start with small specific attainable steps.

[00:04:30] And number five timely.

[00:04:33] A goal needs a time frame.

[00:04:35] Without it, you can't really measure your progress.

[00:04:38] When you make a goal, give yourself a concrete time frame you want to accomplish it in.

[00:04:42] Saying I want to save $5,000 for a trip to Argentina over the next 18 months is a much more

[00:04:48] attainable goal than saying I want to save for a family vacation.

[00:04:52] I know exactly how much I need to save and how much time I need to do it in.

[00:04:57] Figuring out how much to save each week becomes a simple math problem, and I can easily check

[00:05:02] my progress as I go along.

[00:05:05] Why do I need goals?

[00:05:08] Goals are incredibly powerful tools.

[00:05:10] JD wrote the other day about all the creative and flexible ways he uses the data he collects

[00:05:15] from tracking his spending.

[00:05:17] I kind of feel the same way about goals.

[00:05:19] They're useful for a diverse array of things, from getting clarity on what you want to

[00:05:24] staying motivated for the long haul.

[00:05:27] The process of goal setting is a great opportunity to learn more about what you value.

[00:05:32] You get to see your dreams and aspirations take shape as clear or specific intentions

[00:05:37] with concrete achievable steps to get to them.

[00:05:40] It helps you focus on what really matters to you, sorting your genuine aspirations out

[00:05:45] from your day dreams.

[00:05:47] Once you've set the goal, figuring out how to progress towards it and achieve that

[00:05:51] progress is another learning opportunity.

[00:05:54] It's a chance to learn more about how your goal can be achieved and make some choices

[00:05:59] about how you'll get there.

[00:06:01] Let's say you want to save for retirement.

[00:06:03] Once you know how much money you want to save and how many years you have to save it,

[00:06:07] you'll want to lay out a plan to do so.

[00:06:10] This is your chance to learn about your company's retirement plan options, investigate IRAs

[00:06:15] and study the stock market.

[00:06:17] Goals act like a map.

[00:06:19] Once you have your goal in place and you know how you want to get there, you can check

[00:06:22] your actions against it.

[00:06:25] Whenever you go over your monthly spending for example, you can check your progress on

[00:06:29] your goal.

[00:06:30] When you're in a shop considering a purchase, you can ask yourself if it furthers your goal.

[00:06:35] Your goals can guide you to financially sound choices.

[00:06:39] Finally, goals help me stay motivated.

[00:06:42] Save 10% of my income might be a good idea but it's not a very sexy goal.

[00:06:47] It's easy to stray from that principle in the face of tempting travel plans and summer

[00:06:51] camp tuition for the kids.

[00:06:54] Save $5,000 for Argentina on the other hand is a compelling goal.

[00:06:59] I can use pictures of the locations we want to visit to help keep me energized about

[00:07:03] it and watch the savings in my travel account slowly creep towards that goal.

[00:07:12] You just listen to the post titled, Setting Smart Financial Goals by Sierra Black with Get

[00:07:18] Rich Slowly.org and I'll be right back with my commentary.

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[00:09:04] I think goal setting is important, but I can see in my own life that being overly fixated

[00:09:10] on reaching any goal even financial goals might not be all that helpful.

[00:09:16] From my perspective, the point of a goal is to get you moving in a specific direction.

[00:09:22] Once you start moving towards something, you're going to collide into new information or

[00:09:27] learnings that can further inform your goal setting.

[00:09:31] This allows you to learn something about yourself, and potentially pivot on your goal.

[00:09:36] I think goals need to be flexible in order for them to be the most helpful.

[00:09:41] So for example, my original financial goal once I discovered the fire movement was to

[00:09:46] get out of debt and reach my fine number by 40 years old.

[00:09:50] At that time, I would quit my job and retire to never earn any more income again.

[00:09:56] That goal set me on the trajectory to pay off 30 grand of debt in 11 months and start

[00:10:01] saving and investing 60 percent of my income.

[00:10:05] It led me to want to create the economy conference and take on my first side hustle which was narrating

[00:10:11] this podcast.

[00:10:13] But on the path to reach 5 by 40, I collided with new information.

[00:10:18] My W2 job became toxic and I realized that I didn't need to wait to reach 5 in order

[00:10:24] to retire from my corporate career.

[00:10:27] I learned about cost-fi and slow-fi and realized at 33 years old that I had enough money

[00:10:33] to take a risk.

[00:10:34] If I stayed hyper-fixated on my original goal, I wouldn't have quit my job three years

[00:10:40] ago.

[00:10:41] By charting a direction and letting go of the end result, the pursuit of fire has led me

[00:10:47] down some unexpected yet satisfying windy roads.

[00:10:52] And that should do it for today, have a happy rest of your day, and I'll see you on the

[00:10:56] Thursday show tomorrow where your optimal life awaits.