2862: How to Achieve Long-Term Financial Goals by Honey Smith of Get Rich Slowly on Money Advice

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[00:01:08] [SPEAKER_00]: How to Achieve Long-Term Financial Goals

[00:01:11] [SPEAKER_00]: by Honey Smith with GetRichSlowly.org

[00:01:15] [SPEAKER_00]: And I'm your host and personal finance enthusiast, Diania Merriam.

[00:01:20] [SPEAKER_00]: Now let's get right to it and continue optimizing your life.

[00:01:27] [SPEAKER_00]: How to Achieve Long-Term Financial Goals by Honey Smith with GetRichSlowly.org

[00:01:35] [SPEAKER_00]: I recently talked about how personal finance is about playing the long game

[00:01:40] [SPEAKER_00]: and making choices that are harder in the short term for the good of the long term.

[00:01:45] [SPEAKER_00]: But when the payoff is so many years down the road,

[00:01:48] [SPEAKER_00]: it can be difficult to stay on track.

[00:01:51] [SPEAKER_00]: In order to actually reach long-term goals,

[00:01:54] [SPEAKER_00]: you have to keep making the right choices day after day.

[00:01:58] [SPEAKER_00]: How easy is it to fall off the wagon a week or two after you start a new diet, for instance?

[00:02:05] [SPEAKER_00]: You need a game plan for the short term that supports your long game too.

[00:02:13] [SPEAKER_00]: Especially when you're young,

[00:02:15] [SPEAKER_00]: there are just so many goals to strive for simultaneously.

[00:02:19] [SPEAKER_00]: For example, Jake and I currently have the following goals.

[00:02:24] [SPEAKER_00]: Number one, house projects.

[00:02:27] [SPEAKER_00]: We replaced our HVAC and decided solar panels aren't for us right now,

[00:02:32] [SPEAKER_00]: but we still need to demolish a corroded metal shed and resurface our back deck.

[00:02:38] [SPEAKER_00]: Number two, retirement contributions.

[00:02:41] [SPEAKER_00]: Both Jake and I started late in the retirement savings department

[00:02:45] [SPEAKER_00]: and need to contribute extra to make up for the compound interest we missed out on.

[00:02:50] [SPEAKER_00]: Number three, emergency savings.

[00:02:54] [SPEAKER_00]: In addition to the repairs and upgrades we planned,

[00:02:57] [SPEAKER_00]: we've spent several thousand dollars on unexpected repairs.

[00:03:02] [SPEAKER_00]: While we've always had enough cash on hand to deal with these situations,

[00:03:05] [SPEAKER_00]: that means that our emergency fund needs to be replenished constantly.

[00:03:10] [SPEAKER_00]: Not to mention the fact that we would like to beef up our savings account even further.

[00:03:15] [SPEAKER_00]: Number four, student loan repayment.

[00:03:19] [SPEAKER_00]: We've paid off all our credit cards and Jake's car loan,

[00:03:22] [SPEAKER_00]: so our consumer debt is behind us.

[00:03:25] [SPEAKER_00]: However, we still have student loan debt to pay off

[00:03:28] [SPEAKER_00]: that is comparable to a regular-sized mortgage.

[00:03:32] [SPEAKER_00]: And number five, pay down our mortgage or refinance.

[00:03:37] [SPEAKER_00]: We had a somewhat compressed timeline for buying our house

[00:03:41] [SPEAKER_00]: due to the fact that the condo where we were tenants went into foreclosure.

[00:03:46] [SPEAKER_00]: Now that we're in our home for good,

[00:03:48] [SPEAKER_00]: refinancing into a new loan where we aren't paying PMI would be smart.

[00:03:53] [SPEAKER_00]: And this is just a partial list of my goals.

[00:03:57] [SPEAKER_00]: It doesn't include other common financial goals such as travel,

[00:04:01] [SPEAKER_00]: starting a family, saving for a replacement vehicle, etc.

[00:04:06] [SPEAKER_00]: Having many goals that compete for your limited attention and dollars

[00:04:10] [SPEAKER_00]: can certainly make you feel like throwing up your hands and walking away.

[00:04:14] [SPEAKER_00]: This is where setting priorities comes in.

[00:04:17] [SPEAKER_00]: Knowing what is most important to you can help clarify

[00:04:20] [SPEAKER_00]: and tailor your short-term decisions to meet that goal.

[00:04:24] [SPEAKER_00]: Similarly, determining which goals must be achieved sooner rather than later

[00:04:29] [SPEAKER_00]: can help you prioritize and strategize.

[00:04:33] [SPEAKER_00]: Putting your focus on one or two goals at a time may also help keep you motivated

[00:04:38] [SPEAKER_00]: because you can make quick progress towards that goal.

[00:04:42] [SPEAKER_00]: Break your goals into achievable mini goals.

[00:04:46] [SPEAKER_00]: Sometimes the highest priority item on your list has such a long-term horizon

[00:04:51] [SPEAKER_00]: that it's hard to stay motivated.

[00:04:53] [SPEAKER_00]: It can help to break your goals into mini goals

[00:04:56] [SPEAKER_00]: that can be reached more easily and quickly.

[00:05:00] [SPEAKER_00]: This is something I struggle with in regards to my student loans.

[00:05:03] [SPEAKER_00]: Because of the way my consolidation worked, I have two loans.

[00:05:07] [SPEAKER_00]: One is for $30,000 or so, and the other is in the neighborhood of $57,000.

[00:05:13] [SPEAKER_00]: No matter how many extra payments I make, it feels like I'm barely making a dent.

[00:05:19] [SPEAKER_00]: Jake, on the other hand, has four different accounts.

[00:05:22] [SPEAKER_00]: Although in the end he owes a similar amount,

[00:05:25] [SPEAKER_00]: right now he's targeting a loan with a balance of about $8,000 in his payoff strategy.

[00:05:30] [SPEAKER_00]: He should be able to eliminate that entire loan this year.

[00:05:33] [SPEAKER_00]: That's awesome. But when I compare my debt payoff to his,

[00:05:38] [SPEAKER_00]: I feel jealous and frustrated that I won't have a similar achievement in the same time frame.

[00:05:44] [SPEAKER_00]: Instead of giving up, however, I set my goals a different way.

[00:05:49] [SPEAKER_00]: According to my goals post back in 2015,

[00:05:52] [SPEAKER_00]: my January student loan balance was $88,243.

[00:05:58] [SPEAKER_00]: I set my payoff goal for the year to get my student loans under $80,000.

[00:06:03] [SPEAKER_00]: That means my balance would start with a seven.

[00:06:07] [SPEAKER_00]: That really got me excited about making my payments.

[00:06:10] [SPEAKER_00]: It also meant that I would be making progress equivalent to Jake's achievement.

[00:06:16] [SPEAKER_00]: Motivate yourself with a personal finance buddy.

[00:06:19] [SPEAKER_00]: The type of friendly competition or rivalry I described can be motivating for both parties.

[00:06:26] [SPEAKER_00]: Can I pay off a similar amount of student loan debt as Jake,

[00:06:29] [SPEAKER_00]: even though my salary is considerably less than his?

[00:06:34] [SPEAKER_00]: Jake isn't really too concerned about his loans

[00:06:36] [SPEAKER_00]: and probably would make the minimum payment if left to his own devices.

[00:06:40] [SPEAKER_00]: But he would feel pretty silly if he couldn't pay off at least as much as his lesser earning partner.

[00:06:47] [SPEAKER_00]: So he's been throwing extra money at that smaller balance. Win-win.

[00:06:53] [SPEAKER_00]: Of course, rivalry may not be the most motivating type of relationship for everyone.

[00:06:57] [SPEAKER_00]: In fact, if the situation between two people is incredibly different,

[00:07:02] [SPEAKER_00]: a sense of rivalry can make you feel like giving up even more.

[00:07:06] [SPEAKER_00]: For example, if my debts were twice as big as Jake's in addition to our income disparity,

[00:07:12] [SPEAKER_00]: I'd never be able to catch up to his achievements.

[00:07:15] [SPEAKER_00]: Instead of motivating me, it might make me frustrated

[00:07:18] [SPEAKER_00]: and even more likely to consider giving up.

[00:07:22] [SPEAKER_00]: This means that it might be a good idea to try and find a personal finance buddy

[00:07:26] [SPEAKER_00]: who's in a similar starting place as you and or someone with similar means.

[00:07:33] [SPEAKER_00]: Another factor to consider when it comes to finding a personal finance buddy is personality.

[00:07:39] [SPEAKER_00]: Some people might get overexcited by their success and gloat instead of encouraging their partner.

[00:07:45] [SPEAKER_00]: It isn't very motivating to be told that the other person is awesome and you suck.

[00:07:51] [SPEAKER_00]: I'd rather work with someone who could empathize with my difficulties instead of mocking them.

[00:07:56] [SPEAKER_00]: At the same time, however, you want someone to hold you accountable

[00:08:00] [SPEAKER_00]: and call you out when you're not trying as hard as you could.

[00:08:04] [SPEAKER_00]: It needs to be someone who will say,

[00:08:06] [SPEAKER_00]: Hey, I noticed you only made the minimum payment on your student loan last month,

[00:08:11] [SPEAKER_00]: but you went out to eat five times. What gives?

[00:08:15] [SPEAKER_00]: Sometimes we don't even notice when we're slipping into bad habits.

[00:08:19] [SPEAKER_00]: Having a friend who will not only notice,

[00:08:21] [SPEAKER_00]: but gently remind you that you have gone off track can be helpful.

[00:08:24] [SPEAKER_00]: Whatever your plan, establish it in advance.

[00:08:29] [SPEAKER_00]: Reaching big long-term goals such as getting out of debt or saving for retirement

[00:08:34] [SPEAKER_00]: depends on how well you can persevere and meet your short-term goals.

[00:08:40] [SPEAKER_00]: Staying motivated is key,

[00:08:42] [SPEAKER_00]: so it's best to establish a plan at the outset for how to keep your motivation high.

[00:08:48] [SPEAKER_00]: If you wait until you're already in a motivational slump,

[00:08:51] [SPEAKER_00]: it may be hard to find your way out of it.

[00:08:58] [SPEAKER_00]: You just listen to the post titled,

[00:09:00] [SPEAKER_00]: How to Achieve Long-Term Financial Goals

[00:09:03] [SPEAKER_00]: by HoneySmith with GetRichSlowly.org

[00:09:06] [SPEAKER_00]: and I'll be right back with my commentary.

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[00:10:11] [SPEAKER_00]: I'm not one to push delayed gratification

[00:10:14] [SPEAKER_00]: because I think it's more valuable to learn contentment and appreciation.

[00:10:18] [SPEAKER_00]: Rather than accept the discontent of not having what you think you want,

[00:10:23] [SPEAKER_00]: what about just changing your wants?

[00:10:26] [SPEAKER_00]: If you can accept that the best things in life are free,

[00:10:30] [SPEAKER_00]: your journey to financial freedom won't feel like a series of hard choices

[00:10:35] [SPEAKER_00]: and settling for less in the pursuit of a financial goal.

[00:10:39] [SPEAKER_00]: It'll feel like just living the life you want to live

[00:10:42] [SPEAKER_00]: while your investment portfolio quietly compounds in the background.

[00:10:45] [SPEAKER_00]: Keep in mind that the joy of financial independence

[00:10:49] [SPEAKER_00]: isn't reserved for the finish line.

[00:10:52] [SPEAKER_00]: Any progress towards a financial goal contributes to increased financial security overall,

[00:10:58] [SPEAKER_00]: which I think is way more valuable.

[00:11:01] [SPEAKER_00]: The goal for me personally isn't to reach a certain net worth number.

[00:11:05] [SPEAKER_00]: It's to have enough financial security that my money

[00:11:09] [SPEAKER_00]: isn't driving my decisions about how I'm going to spend my time.

[00:11:12] [SPEAKER_00]: In fact, as much as I talk about money every day,

[00:11:16] [SPEAKER_00]: I actually spend very little time thinking about my own.

[00:11:20] [SPEAKER_00]: I started out being mindless about my money

[00:11:23] [SPEAKER_00]: and unaware of where it was going.

[00:11:26] [SPEAKER_00]: I then became hyper aware and learned to be intentional with spending

[00:11:30] [SPEAKER_00]: and how to put my money to work.

[00:11:32] [SPEAKER_00]: And now I'm back in a place where my personal finances

[00:11:35] [SPEAKER_00]: aren't the main focus of my life,

[00:11:38] [SPEAKER_00]: but from a much different vantage point.

[00:11:41] [SPEAKER_00]: And that should do it for today.

[00:11:43] [SPEAKER_00]: Have a happy rest of your day,

[00:11:45] [SPEAKER_00]: and I'll see you for the Thursday show tomorrow

[00:11:47] [SPEAKER_00]: where your optimal life awaits.