Part 1: Set Your Financial Independence Goals

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When you start your journey to financial independence there’s a lot to consider and go through. There might be many new things you’ll end up learning about or just points you had never really thought about before.

To avoid you feeling overwhelmed and to provide some structure to your path to FI, I’ve divided the many topics into 10 smaller parts, to help you get started on your journey to Financial Independence.

Part 1: Set your Financial Independence Goals

Before you set out on any new adventure, it’s often helpful to take a step back and think about why you are embarking on that new mission. What are you trying to achieve?  What aspects of your current situation are you not as content with and would you like to change? How would your life change for the better? Once you know why you are starting  this new journey, it’ll work as a motivator to get back on track anytime you find yourself veering away from it.

Once you know your reason, it is equally important to define what your new situation would look like when you get there. What is your end goal? What are some of the milestones that you would need to achieve before reaching that final destination?

It often helps to state your objectives as clearly as possible and to visualise exactly what that would look like. Instead of thinking you would like to have more money, define why you want that money, how much you want, what you would do with it and picture what your life would look like.

Here is an example of what that might be:

“I want to have more money so I can spend more time with my family being outdoors. In particular, would need X amount of money to buy a small condo in the mountains. During holidays and for long weekends we can just drive up to our second house and enjoy our time together out in nature.”

Lastly, an important aspect of part 1 of your journey is keeping track of your progress to financial independence and motivating yourself to stick to your targets. You can do this by creating a vision board with your goals, by creating a tracker of your progress as well as by celebrating each time you reach one of your smaller milestones along the way.

Find some time today to look at the questions and guidelines above and then note down some of your answers to them to get you started on your path to Financial Independence!

The above is an adaptation of part 1 of the 10 parts in the guidebook to Financial Independence100 Steps to Financial Independence: The Definitive Roadmap to Achieving Your Financial Dreams where you can find more details as well as action plans and guidelines to each of the 10 parts. Available in both ebook and paperback format!

Coming up next: Part 2 of the Journey to Financial Independence: Define your Starting Points

Level 2: My Financial Objectives

Level 2: Set Financial Goals

Step 2: Set Financial GoalsThis post describes how I implemented step 2 of the mission to Financial Independence. To read more about how you can set your own financial goals, please refer to step 2: Set Financial Goals

After making a commitment to achieve Financial Independence, the next level up is setting financial objectives. I wanted to set clear financial objectives that, although I was aware might still change later on in this mission when I dive a little deeper into different financial topics, would be my main anchors and most important outcomes of  my journey.

At the start of my own mission to Financial Independence I identified to following objectives I wanted to achieve:

  • Set aside money on a monthly basis. 

This is an important one for me as I am aware that I should be setting aside money for my future. I want to make sure that I add to my monthly savings regularly to have separate savings to rely on when I become Financially Independent.

Added to that I also wanted to set aside a fixed amount each month for various short term goals so that when the time comes to make a purchase I not only have money set aside but also know how much I can spend on it. This includes a yearly fund for (Christmas) presents, flights (I don’t live in my home country but luckily living in Europe it is easy for me to go back and see my friends and family from home relatively easily, but I do of course need money to buy flights!) and medical expenses.

Using the SMART goal setting method (see infographic further up), this would translate into: “Build up a 6 months freedom fund by January 2023 in case I end up without an income to cover my expenses during half a year, by setting aside €150 per month.” And the second goal: “Set aside €100 per month for specific targets including flights, presents and medical expenses to be able to use whenever needed.”

* If you want to find out more about setting financial goals using the SMART technique, put your email below to get a free worksheet you can instantly print and use!*

  • Plan how to become debt free

I have a (relatively small) student loan as well as a mortgage and whilst there are people who say you should pay off all debt as soon as possible, others are more cautious, bringing in arguments about interest rates, rate of return and inflation. All things that I couldn’t put together into a big picture or plan to know whether or not it was wise to pay of my debt as quickly as possible or not, as I didn’t know what these things meant nor how to use them to make a decision. As part of my financial journey I wanted to be able to decide if and how to pay off my debt as soon as possible based on knowledge I’d hoped to gather during this journey.

The SMART goal was therefore: “Know by May whether I should accelerate my debt payments, by understanding how inflation, interest rates and returns affect this decision. If I decide to pay down my debt aggressively, have a set plan to put into place by June.” 

  • Understand my pension provision

Admittedly I am still many years away from retiring (I’m in my 30s), but I didn’t feel comfortable not knowing anything about my pension and what that would look like. There are many stories going around that by the time my generation retires, our (state) pensions will no longer exist as they will have become too expensive to sustain. Not a great prospect so I decided I had to become proactive and learn what my own exact pension situation currently looks like and whether I needed to take steps to build in an extra safety net.

In SMART terms this would be: “By July I want to understand my own pension provisions projections I am entitled to and have a set plan to put into place starting that month if I decide to increase my pension contributions via a private pension plan.”

  • Learn about investing 

I never learned anything about investing and had no idea what shares and portfolios were when I set out on this mission. When people said they were investing part of me could only think that all those people were just bound to lose all their money soon, yet another part of me kept wondering why so many people were investing. Surely something must be attracting them into the market? Was there after all a way to make money on the stock market without a guaranteed financial disaster looming over? I wanted to learn about investing so that I could make an informed decision as to whether or not I wanted to start putting in some money too.

The SMART version was: “Understand what investing is and how it might apply to me personally. Decide whether to invest or not by August and have a plan to put into place by September if I decide to start investing.”

These were my four main objectives before I set out on my 100 steps mission. As you might understand I added in a lot of other objectives along the way and also modified some of the above, but knowing what I wanted to get out of this journey greatly helped me stay focussed and motivated. To read up more about setting financial goals, read the broken down explanation of step 2.

Grab your free worksheet to start setting your own Financial Goals here by leaving your email address below.

Let me know about your own goals below or on your favourite social media!

Level 1: My Commitment to Achieving Financial Independence

Step 1_ Commit to your mission to Financial Independence

Once I had decided I wanted to become Financially Independent, so that I could regain more control over my time and future, I was aware I had to make the following step: a commitment to my journey, a first advance towards the next level on my way to my ultimate goal of financial freedom.

In order to move from level 0 – my starting point – to level 1, I had to take full responsibility for my progress and dedication to that journey, to make sure I wouldn’t give up on it halfway through.

Following the 100 steps that I have laid out previously on this website, Step 1 is making a commitment to your mission. With the various ideas suggested in step 1 in mind, I have decided to do the following:

1. A sticky note

I’ve put a sticky note on my bathroom mirror. In this way I can see it several times a day, and especially in the morning, to remind myself of my mission. It currently says: “On a mission to Financial Independence.” but I might change the wording with time. You can find a picture of it here on my Instagram account.

2. An accountability partner

I have in fact found several accountability partners: myself and 5 others have formed an accountability group in which we have set ourselves a big as well as five small targets we’d like to achieve over the course of a year. We meet once a month to give updates and ask each other critical questions to provoke honest answers and make sure we live up to the targets we have set and to help each other remain motivated and on the right track. I’ve also got a weekly check in meeting with my partner to discuss progress on some of our targets, including my goal of achieving financial independence.

3. Use of social media

With the upcoming launch of my 100 Steps Mission to Financial Independence book (around June 2018), I decided I’d probably need some social media presence anyway, so I am currently using my Facebook, Twitter, Instagram and Pinterest accounts to put together interesting articles and images to do with Financial Independence and Money Wisdom. In that way I am not only letting others know about my journey, I also hope to inspire people to aim for more financial freedom.

4. My bullet journal tracker and diary

This is the one I am most excited about, as I really believe in the power of a tracker to keep your progress visual. I also find my bullet journal really helpful and motivating to use, so I have decided to get a new bullet journal that I use specifically to keep a log of my steps towards financial independence. I have started with a tracker for step 1, which is an overview of 100 steps, with each step represented by a square, that I will fill or colour in every time I have successfully implemented or completed a step. You can again find a picture of it here on my Instagram account. If you would like to get a free copy of this tracker, leave your email below and I’ll send you an email with a free download that you can print and instantly use!

5. My cat

I can’t finish the list without also including a special mention to my cat, Monkey, who ever since I started working on putting together my 100 steps, has always been faithfully sitting next to me, in front of me, right on top of my laptop, sprawled along all of my papers or in any other way close to me…. You can see her here “supervising” me writing this current blog post here. Whenever I work on the 100 steps she is there with me, keeping me accountable I guess!

And there you have my 4 (or 5) ways of committing to my goal of becoming Financially Independent. For more ideas or if you’d like to read more about the very first step of the 100 steps mission, check out this description of step 1. Remember also to leave your email below to get a free copy of the 100 steps tracker sent to your email.

I’d love to hear about your commitment or ways of making sure you will stick to your goal, so please let me know in the comments below or by posting a photo on your favourite social media.

Step 93: Celebrate your Victories

Step 93 of the 100 steps mission to financial independence: Celebrate your Victories
Step 93 of the 100 steps mission: Celebrate your Victories

As we’ve discussed a few times, setting goals is one thing but achieving them is a whole different thing. Goals are usually easy to set and difficult to achieve (and require some real commitment and dedication) and this can be especially true for such radical goals as “quit smoking” or “exercise daily” that require an almost “all or nothing” attitude in which you either succeed or not.

Yet these type of goals have one big advantage over many long-term financial goals: it is easy to see how successful you are. Every hour you don’t smoke a cigarette is an immediate success: your goal is to stop smoking and your success is easily measured with a simple yes or no at the end of each hour: did I achieve it or not. The same is true for a goal such as “exercise more”: at the end of each day you can simply ask yourself: did I achieve this today? A yes will make you feel good, and a no will hopefully give you a kick up the bum to try again tomorrow.

Many financial goals don’t have this luxury: many are probably long-term goals and if you don’t see a lot of progress it might be difficult at times to keep your motivation up. Say your goals is to save together your $1,000 emergency fund. At the end of the day you can’t ask yourself: “did I save $1,000 today?”. Or imagine you’ve decided that you need to get $20,000 together for a down payment, that again will probably take you a fairly long time. What about “saving up for retirement”? How much are we talking about here? And how long will it take you to get that money together? With none of these goals you can say: I achieved this today!

As you continue on your journey to financial independence, your goals might become bigger and more abstract but let’s not forget that goals aren’t just for the future, they are also for the now. Focus on them now and you’ll achieve your future goals, forget about them now and nothing will come of them ever – not even in a million years.  Continue reading “Step 93: Celebrate your Victories”

Step 92: Track you progress

Step 92 of the 100 steps mission to financial independence: Track your Progress
Step 92 of the 100 steps mission: Track your Progress

One of the most fun parts of setting goals is seeing yourself getting closer to it with each step that you take. By tracking your progress (and celebrating your victories – something we’ll look at in the next step), becoming financially independent isn’t just a fun end goal, it should can also become a fun journey.

Regardless of your financial goal, whether it is big or small and whether it is a goal for the distant or for the near future, keeping track of how you are doing isn’t just  stimulating and motivating. If you track your progress and keep your tracking somewhere easily accessible and visible, you are also reminded of your goals regularly, which in turn helps you stick to your goal.

Compare the following situations:

  • Situation 1: You decide you want to save $10,000 for a specific goal. The first few days or weeks you feel very motivated and eager to get the money together and you cut out some expenses so you can assign some extra money to your goal. Yet little by little with time you start forgetting about your goal, you stop cutting some of those expenses and within a few weeks you stop putting money aside all together.
  • Situation 2: You decide you want to save $10,000 for a specific goal. You get out a big piece of paper, at the top write: $10,000 for (insert your goal). You decide that for every $10 or $25 you’ll draw a dollar note. You stick the paper in your agenda, on the inside of your bathroom cabinet door or on the fridge. Every time you see the paper you are reminded of your goal and how much you have left to save, which motivates you to take another small step so you can contribute just a little more and draw another dollar note. The more you save, the more motivated you become as you keep seeing the number of dollar note pictures increasing on the paper.

See how different tracking your progress can be in order to actually progress even more and keep up your goal? Tracking isn’t just to see how much you have saved. You can also use this strategy to track how much you have paid off a specific debt. Continue reading “Step 92: Track you progress”

Step 84: Find a Mentor

Step 84 of the 100 steps mission to financial independence: find a mentor
Step 84 of the 100 steps mission: Find a Mentor

Once you get further down your mission to financial independence, finding yourself a good, trustworthy and inspirational mentor can be absolutely key to your success on this mission. Especially if your aspirations go beyond “getting more control over my finances” and if you have indeed set yourself the target to get somewhere between stages 4 and 8 of the 8 stages of financial independence, you might find that without a mentor it will often feel like treading water.

Note that a mentor is very different to a financial advisor: the latter you pay whereas the first one you don’t. An advisor is also more a person to give you practical advice whereas a mentor can be more inspirational, somebody who keeps you going even when the going gets rough.

The advantages of having a mentor

A mentor can help you in a myriad of ways, including some of the following: Continue reading “Step 84: Find a Mentor”

Step 78: Set your Financial Independence Goal

Step 78 of the 100 steps mission to financial independence: Set your Financial Independence Goal
Step 78: Set your Financial Independence Goal

All along this mission we have been talking about financial independence and I’ve identified and described steps that will help you to get closer to your financial independence. But what exactly is Financial Independence to you? It is important to have a goal and to know what you are working towards to in order to once actually achieve that goal. Now that we are nearing the last part of our 100 steps and now that you know a lot more about finance and money management, you’ll want to dedicate some time to determine your long-term goal so you can kick things into next gear and align your mission with your ultimate financial goal.

Four goals of financial independence

Below are four common goals that people have for their financial independence. They are presented in a logical progression to go through and whereas getting to stage 1 should be easy if you follow this mission plan and even getting beyond that first step into the 2nd step might not be too difficult if you keep up well with the plan, getting into that 3rd stage depends completely on whether you push yourself beyond your current beliefs, habits and limitations and of course whether you ultimately really want to get there. Remember also that whilst the last stage of financial freedom might seem almost unattainable for most of us, it is not completely impossible. People like you and me have done it before and will do it again. But hey I admit that requires some SERIOUS hard work and dedication.

Let’s discuss the four common financial independence goals you might identify with and see which one corresponds most closely to your financial goal at the moment. Continue reading “Step 78: Set your Financial Independence Goal”

Step 77: Make a Year Budget

Step 77 of the 100 steps mission to financial independence: Make a Year Budget
Step 77 of the 100: Make a Year Budget

We’ve looked in detail at making a monthly budget where you carefully plan your expenses per category per month to ensure that you achieve your goals, both short-term as well as long-term, especially when it comes to savings, pension and investment goals. Without a budget it is easy to overspend and to lose the overview of where your money goes each month.

In addition to making a monthly budget it is wise to also draw up a yearly budget in which you make a yearlong plan for your expenses. We’ve already touched upon this a little when we discussed making a monthly budget, when we looked at the importance of bearing in mind certain yearly expenses that don’t come up every month but might come up just a few times or even just once a year.

A yearly budget doesn’t only ensure that you remember to budget for these expenses though. The added advantage of a yearly budget is that you can make a better and more accurate plan for your expenses by bridging the gap between your long-term financial goals with your day-to-day spending patterns. Of course, having a monthly budget already gives you the opportunity to plan expenses far better than if you just spend without being fully aware of your monthly total spending pattern. But it won’t give you as much insight into whether you are on your way to achieving your long-term financial goals or whether you are still quite a long way off. By making a budget for a full year you get a far better overview of this. Continue reading “Step 77: Make a Year Budget”

Step 72: Rebalance your Portfolio

Step 72 of the 100 Steps Mission to Financial Independence: Rebalancing your Portfolio
Step 72: Rebalancing your Portfolio

This and the next step look at managing your assets in your portfolio on a long-term basis to ensure they remain aligned with your goals. With time some assets might grow faster than others, goals might change or you might want to change the risk level of your portfolio the closer you get to your goals. In all cases this can be dealt with by rebalancing your portfolio and re-allocation your assets. Similar to the investing principle of “buy when everybody else is selling”, which we discussed in step 54, the rebalancing of your portfolio is another investing concept which is easy to understand and execute logically, but can be difficult to implement psychologically.

Yearly rebalancing

The yearly rebalancing of your portfolio ensures that if one area of your portfolio does really well in one particular year, you don’t deviate too much from the original asset allocation that you had in mind for your portfolio. If one assets grows much more than another, it might make your portfolio too volatile or too safe for your goals and risk tolerance.

Let’s look at an example and assume that you want a 70% shares and 30% bonds allocation in your portfolio. You put in $10.000 and the moment you enter the market both bonds and shares happen to be $100 per unit. Ignoring costs for the sake of this example, that means you’d have $7.000 in shares and $3.000 in bonds. A year later the shares have far outperformed the bonds, and even though both have gone up in prices, your bonds are now worth $3150 (a 5% increase), whereas your shares are now worth $8050 (an increase of 15%). The stocks and bonds allocation is now no longer 70/30 but 72/28. Not a huge difference you might think but if the shares keep outperforming bonds by that much for a few years, you might end up with an 80/20 portfolio in just a few years. Continue reading “Step 72: Rebalance your Portfolio”