The importance of writing down your financial goal to achieve financial independence and to retire early

 

Emerald Isle Beach, North Carolina 

Welcome back!  In this post, I’d like to discuss the importance of writing down your financial goals so you can plan for your future effectively.

When I started working at my last job which would last over 13 years, the first thing I did, once I had worked there for about two years, was to write down how I thought my financial situation would look like by the time I turned 58.  Back then, my original goal was to retire at age 58 to pursue my lifelong goal of becoming a beach bum somewhere.  

I imagined living like someone who didn’t have any worries and just lived life one beautiful sunny day at a time...I thought age 58 sounded like a good age for retirement when I was 37 years old.  

What I had written down back then were the following:

  • I should have around $500k in retirement account.  I thought I would withdraw 4% of that money for around $20k per year.  
  • I should have paid off my mortgage by then, so positive equity would be used to fund my retirement along with my retirement account.  I figured I would put $100k into a money market account/savings account so it can generate around $5000 in interest each year.  Back then, online savings interest rate was around 4-5%.  This would generate about $400 per month.
  • The rest (around $250k) would be in a bond mutual fund generating about $1000 per month at around 5% interest.
  • I calculated I should have around $3000 per month in income, not counting social security.  I figured this would be a good place to be in at that age.
I wrote down on a spreadsheet what I wanted to accomplish each year.  For example, I wrote down how much additional principal to pay per month to reduce my mortgage and to end it quicker.  I wrote down when I expected to pay off the mortgage in full.  

Back then, the whole idea of FIRE (financial independence retire early) movement had not been known to me.  This would happen within the next year or so...

I thought I would be ok financially if I kept paying off the mortgage as fast as I could.  Unbeknownst to me at the time, my home would not appreciate even a paltry 1% yearly as I had expected.  This was a bad calculation on my part...

I had been spoiled by my two previous real estate purchases.  The first one was a co-op in Queens, NY (first purchased home) which turned a hefty profit of $110k when we sold it after about 4 1/2 years.  The second one was a condo in Hawaii (second purchased home) which turned a profit of $115k.  We had lived there just over two years.

The important part of all this is to allow some mistakes to happen (like with my real estate purchase in Pennsylvania), but write down your best plan as best you can.  It’s the act of writing your plan or goal that helps to solidify your future.  You need to take responsibility for your goal/plan.  You should do the best you can, and try to follow your plan month by month, year by year.  

As you saw in my future plan, the real estate thing did not work out.  But my investments did work out better than my original plan/goal.  

You can always tweak your plan if they don’t work.  There were months where the additional mortgage I was planning on paying didn’t materialize.  Water heater broke is what happened, or the roof started to leak...You will have hurdles along the way.  It’s part of life, but you work around it.

If you have a month which changes your plan, just do better the following month.  No one can see the future.  You might as well PLAN for it as best you can, but be flexible enough to deal with it...

Here are my recommendations on how to put your financial goals to writing:

  • Start one for the next month this month.  Commit to what you’re going to do.  Whether that’s paying off your mortgage quicker, student loan quicker, or saving more towards your retirement account, put in writing what that amount will be.  
  • Lay it out for the whole year the same way.  Commit to the amount and write it down.  
  • Plan out how you see your financial situation in 3, 5, and 10 years.  This will be a best estimate based on what you know (money coming in/money going out).  You need to be able to see a brighter financial future in writing so you can get motivated to do well.  
  • Each month, sit down with your significant other (or by yourself) to see how it went.  Did your plan work this month?  In the beginning, it won’t be easy to see the big picture, where your future financial situation is bright!  Keep at it, and push forward.  Just keep in mind, whatever you’re paying or saving towards retirement will be helpful down the line.  Savor the little victories every month, then repeat it.
  • Repeat this process at the end of the year to see how you’ve done.  Pat yourself on the back if you’ve met your goal.  If not, don’t be discouraged.  Just keep pushing forward and do better.  This is a long game.  You won’t get to financial independence overnight!  
Putting your financial goals to writing should be something you do immediately for financial well-being.  It helps fortify your plan and make you responsible for your plan.  It holds you accountable to your commitment.  The act of looking at your better future in writing, will motivate you like it motivated me, to want to achieve financial independence and to retire early.

Thank you all for reading!


Jake

Wandering Money Pig 



If you missed the post ‘What’s it like to hand in your resignation...’, please click here.

If you missed the post ‘How to retire early...’, please click here.

If you missed the post ‘We sold our home during the pandemic...’, please click here.

If you missed the post ‘What is the FIRE (financial independence retire early) movement...’, please click here.

If you missed the post ‘Magic of compounding interest...’, please click here.

If you missed the post ‘Our minimalist update…’, please click here.

If you missed the post ‘Dangers of entitlement on your path to happiness…’, please click here.

If you missed the post ‘Get rid of debt to reach your goal of financial independence…’, please click here.

If you missed the post ‘Thinking of moving to Pennsylvania…’, please click here.

If you missed the post ‘Learn to say enough to be happy on your path to financial independence and to retire early…’, please click here.

If you missed the post ‘Why is downsizing/minimalism so difficult…’, please click here.

If you missed the post ‘Is America still a land of opportunity…’, please click here.

If you missed the post ‘Learn a skill that pays you well to retire early…’, please click here.

If you missed the post ‘Invest and not save for retirement…’, please click here.

If you missed the post ‘Learn to enjoy the moment for life and for FIRE…’, please click here.

If you missed the post ‘The correlation between consumerism and early retirement…’, please click here.

If you missed the post ‘Retire on $200,000 (200k)…’, please click here.

If you missed the post ‘Adapting to change for life and for FIRE…’, please click here.

If you missed the post ‘Thinking of moving to Hawaii…’, please click here.

If you missed the post ‘Tough childhood leads to success in later life…’, please click here.

If you missed the post ‘Thinking of moving to New York City…’, please click here.

If you missed the post ‘Importance of finding purpose in early retirement…’, please click here.

If you missed the post ‘What is the rule of 72…’, please click here.

If you missed the post ‘Retire on $100,000 (100k)…’, please click here.

If you missed the post ‘The importance of a significant other’s role in your path to FIRE…’, please click here.

If you missed the post ‘Save for retirement or pay off debt…’, please click here.

If you missed the post ‘How much do I need to retire…’, please click here.

If you missed the post ‘Early Retirement Manifesto…’, please click here.

If you missed the post ‘Pros and cons of early retirement…’, please click here.

If you missed the post ‘How to save money when traveling…’, please click here.

If you missed the post ‘What is the average 401k balance…’, please click here.

If you missed the post ‘Doing a garage sale during the pandemic…’, please click here.

If you missed the post ‘First few months after early retirement…’, please click here.

If you missed the post ‘Not caring too much equals happiness…’, please click here.

Please check out our YouTube channel ‘Wandering Money Pig’ showcasing our travels and our Pomeranian dog! https://www.youtube.com/channel/UC3kl9f4W9sfNG5h1l-x6nHw


Popular posts from this blog

AirBNB horror story: How we got a refund from AirBNB due to a noisy neighbor…

Image
  Letchworth State Park, NY My wife and I (and our Pomeranian Toby) have been slow traveling since our early retirement last August.  We rely on AirBnB or Vrbo when we travel, and this past April was no exception. We chose a monthly rental via AirBNB in the month of April, in a town called Claysburg, Pennsylvania.  The rental was a studio unit that has a bed, a futon, full kitchen and a private bath. On the day of our arrival (April 1st), we were greeted by snow falling at the condo.  It was a beautiful sight to behold! We checked in with no problems and slowly settled in.  The next three days were uneventful.  We did our usual unpacking, then we went shopping for food from a nearby supermarket the following day.  We enjoyed the sights nearby and were having a good time at a new location. By Monday of the following week, our luck had changed for the worse.  The neighbor upstairs did what sounded like to us, either deep cleaning and renovating! We heard loud music blasting, while heavy
Read more

Review of Fiore Suite and classic room at the Borgata, Atlantic City, NJ (New Jersey)

Image
  Classic Room at the Borgata, Atlantic City My wife and I have been going to the Borgata hotel and casino since its opening 18 years ago thanks to my dad.  My dad had a loyalty/player’s card which allowed free hotel stays (comped rooms).  We couldn’t resist free hotel rooms when my dad asked if we wanted to go! Fast forward to now. I now have a loyalty/player’s card that I use to take my parents to the same hotel for free.  Funny how roles switch...My dad used to treat us to free rooms, so now I’m treating him...Favor returned! Borgata Hotel & Casino was built in 2003 to huge fanfare when it opened.  Costing then $1.1 billion, it rivaled the best hotels in Las Vegas and New York City.  It features 2000 rooms, outdoor / indoor pools, a spa, a buffet, 3000+ slot machines, and many high end restaurants. Since its opening, it added the Water Club (a boutique hotel) in 2008 at a cost of $400 million, which added another 800 rooms to the available room capacity.  The casino is located
Read more

Review of Vdara Hotel, Las Vegas, NV (Nevada): Pros and Cons

Image
  Vdara Hotel, Las Vegas (entrance area) My wife and I had visited Las Vegas on numerous occasions.  I had visited five times while my wife had visited three times, up until the last trip.  When we decided to go on a vacation, we again decided Las Vegas was the right destination for the both of us. Las Vegas is a desert oasis that is home to nearly 2.7 million people.  Over 45 million visitors have stopped over at Las Vegas in 2019.  It is the most exciting city west of New York City, and it certainly earns its moniker of ‘Entertainment Capital of the World’! I started going to Las Vegas in 2001 when COMDEX trade shows were still being held at the Las Vegas Convention Center.  This was right after 9/11 happened. COMDEX was held in November of that same year. I remember going to the airport with trepidation and worry.  New York City was still reeling from the aftermath of 9/11.  There were still cleanups going around downtown Manhattan.   From our apartment building in Queens, NY, we co
Read more