2886: Make a Wish List of Financial Goals by JD Roth of Get Rich Slowly on Personal Finance Planning

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[00:00:39] This is Optimal Finance Daily. Make a wish list of financial goals by JD Roth of Get Rich Slowly.org

[00:00:49] And I'm your host and personal finance enthusiast, Diana Merriam.

[00:00:53] Now let's get right to it and continue optimizing your life.

[00:01:01] Make a wish list of financial goals by JD Roth of Get Rich Slowly.org

[00:01:09] If one moves confidently in the direction of his dreams and endeavors to live the life which he

[00:01:16] has imagined, he will meet with a success unexpected in common hours. Henry David Thoreau

[00:01:24] What would you do if money were not a concern? Would you quit your job? Would you travel?

[00:01:31] Would you live in another state, another country? Would you write? Would you garden?

[00:01:37] Would you devote your life to charity? Would you race cars? Would you enter politics?

[00:01:42] Many people make poor financial decisions because they don't have long-term personal goals.

[00:01:48] If you don't understand that buying a new cell phone or playing a game of poker

[00:01:53] takes money from a larger goal, a new home, a new car, a vacation to Europe,

[00:01:59] then there's no incentive not to use the money for whatever seems fun at the moment.

[00:02:05] Setting goals is easy. Grab a piece of paper and a pencil. Make four columns and label them

[00:02:11] long-term, intermediate, short-term, and immediate, respectively.

[00:02:17] Long-term goals

[00:02:19] Imagine that money isn't an issue. Where do you see yourself in 10 or 20 years?

[00:02:24] Where are you living? What are you doing? If you could do anything in the world full-time,

[00:02:30] what would it be? Consider these questions for 5 minutes.

[00:02:35] Let your mind wander. Let your imagination pull you where it will.

[00:02:40] Do you see yourself as a writer? Are you a pilot? Do you have a cabin in the hills?

[00:02:45] When you find yourself considering something that seems like an extension of yourself,

[00:02:50] something you truly want to do, write it in the long-term column.

[00:02:55] When I do this exercise, I always have the same vision. I'm a writer,

[00:03:00] sitting at home in front of a big oak desk. I'm making my living by writing. That's my

[00:03:06] long-term goal – to be able to stay at home and write. But how can I afford to do so?

[00:03:13] Intermediate goals

[00:03:15] After you've developed a couple long-term goals, ask yourself, what would it take for me to reach

[00:03:21] them? Would you have to quit your job? Would your family have to move? Would you need to go back to

[00:03:27] school? Would you need to save a sum of money? In order for me to write full-time, several things

[00:03:34] have to happen. First, I need to hone my craft. I need to practice. I also need to become better

[00:03:41] educated. I might do this through reading or by taking classes on evenings or weekends.

[00:03:48] Ultimately, if I want to be a writer, I'll need to quit my current job. But to do so,

[00:03:54] I need to have saved a nest egg that can support me as I make the transition to writing full-time.

[00:04:00] Look at your long-term goals. What steps do you need to take in order to reach them?

[00:04:06] What do you need to make happen in the next 3-5 years?

[00:04:10] Jot these actions in the Intermediate Goals column.

[00:04:15] Short-term goals Now that you've established some

[00:04:18] long-term goals and have some idea of what intermediate steps are necessary to reach them,

[00:04:24] spend some time considering what you can do in the next year to start the journey toward them.

[00:04:30] If your long-term goal is to be running a successful dune buggy business in 10 years,

[00:04:37] what steps do you first need to take? These first steps are your short-term goals.

[00:04:43] Though you set your long-term goals by ignoring money, money is key to establishing short-term

[00:04:50] goals. Intermediate and long-term goals are most easily achieved if a solid financial foundation

[00:04:56] is set early. If your long-term goal is to live in another country, your short-term goals will

[00:05:02] likely involve eliminating debt, building equity in your current home, and investing for growth.

[00:05:09] In order to pursue my goal to become a writer, I need to eliminate all debt, make investing a habit,

[00:05:18] strengthen my emergency fund, and save enough to be able to quit my job and go back to school.

[00:05:24] Immediate Goals The final question to ask is,

[00:05:29] what can I do now in order to help me achieve my long-term goals? This may be the most difficult

[00:05:35] question to answer. How can anything you do today possibly affect your long-term goals?

[00:05:41] And yet the truth is everything you do today affects your pursuit of these goals. Every time

[00:05:48] I choose to buy comic books instead of putting the money towards my home equity loan, I'm tactically

[00:05:53] agreeing to put off my long-term goal just a little longer. Every time I go out to a fancy dinner,

[00:06:01] I'm adding an extra day or two or three to the time it will take to achieve my dreams.

[00:06:07] I'm not saying that you should forgo all pleasure now in order to obtain future rewards.

[00:06:13] But as Dave Ramsey is fond of saying, if you will live like no one else, later you can live like no

[00:06:21] one else. The best way to make sense of short-term personal finance decisions is to have a clear

[00:06:27] long-term objective. If all you want to do is hang around town, work 9-5 and hang out with your

[00:06:34] buddies, and there's nothing wrong with this goal, then you probably don't need to change much.

[00:06:39] But if your dreams are bigger, then you need to align your spending with your goals.

[00:06:48] You just listened to the post titled, Make a Wish List of Financial Goals by J.D. Roth of

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[00:08:01] This article made me think about an exercise I did while reading the book,

[00:08:05] Design Your Life by Bill Burnett and Dave Evans. It's called an Odyssey Plan and it's a great way

[00:08:12] to think creatively about what you want your life to look like even before you start setting goals

[00:08:18] to move in a certain direction. You basically dream up three different five-year plans.

[00:08:25] The first is continuing the trajectory you're on now. The second is what you would do if your

[00:08:31] current trajectory were no longer an option. And the third is a wild card. What would you

[00:08:38] do if you had all the money and resources you could want and no one was watching?

[00:08:43] I first did this exercise in 2018 and I spent quite a bit of time allowing my imagination to

[00:08:50] run wild. What's interesting in looking back at what I wrote down is that my life now is basically

[00:08:58] a combination of those three different scenarios. Goal setting can be tricky because sometimes we

[00:09:05] get so focused on a goal that we forget to appreciate where we are now or we suck all

[00:09:11] the joy out of the journey. But if we can think about goals as setting a trajectory just to

[00:09:17] figure out what action to take right now or what to do next, they can be very helpful. My approach

[00:09:24] now is to move towards goals but to let go of any expectation of the end result. That allows me to

[00:09:31] be flexible and pay attention to what unfolds along the way. And that should do it for today.

[00:09:37] Have a happy rest of your day and I'll see you for the Thursday show tomorrow,

[00:09:41] where your optimal life awaits.