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By the author of What School Should Have Taught You and The Faithful Prepper.
Benjamin Franklin is known for having said if you fail to plan, you plan to fail. That is very much the case within the world of personal finance. You have to develop financial goals. If you don’t take an invested interest in figuring out where you are right now, how much you have, what you can make on a monthly basis, what your debts are, and where you want to be, you’re going to have a hard time getting out of any financial ruts that you have fallen into.
You have to make a plan.
Crafting a budget is a huge part of this, yes, but it’s a component. The act of making goals is something separate – something larger. It is the forest. The budget is the trees.
Are you in debt right now? The odds are, yes. According to one study, the average American is $90,000 in debt. Other studies say that number is lower (around $50,000 per American), but the point is that there are a lot of Americans living under the yoke of debt.
Approximately 77% of us, to be precise.
I think one of the most important things about this is not to become a fatalist about this.
I hate fatalism. Don’t get beat to the conclusion that debt is a normal part of life that you have to go through. It’s not, and there are things you can do to dig yourself out of it.
Sit down and figure out what is a possible timeframe by which you and your family could get out of debt. Is it possible – through sacrifice, hard work, and daily drive – to get your family completely out of debt over the course of the next five years?
Let’s say you are the average American with $50,000 in debt.
Twelve months per year x 5 years = 60 months that you have to work with.
If we take that $50,000 and divide it by 60, that means we would need $833/month for the next five years to make this a reality.
Let’s be honest: that’s a lot of money.
But it’s through looking through the math of these different situations that we’re better able to come up with concrete, actionable goals for ourselves and our families. Even if you look at that above figure and come to the conclusion, “Well, that’s not going to happen,” at least you now have a benchmark to work from.
You now know that it would take an additional $833/month to be out of debt by the end of five years. And while you may not be able to make that happen, are there steps you can take that will at least help you to reach that goal?
Can you sell one of your family’s vehicles, netting a cool $4000? Can you cancel two or three streaming services? Can you work one overtime shift per month? Let’s say you do so. You get $200 for your overtime shift and at least $500/year for your streaming services.
Your overall debt is $46,000 after the Honda Civic has been sold, and you’ve just put an additional $2900/year in your pocket from a few changes in your family’s work and spending patterns. If you looked at your budget before and thought that only $300/month was what you could put towards your debt, you’ve now made it so that instead of paying everything off in 14 years, you can now pay off everything in seven years.
You’ve just halved the amount of time it will take your family to be free from debt, but it took a hard look at the numbers and the creation of financial goals to get you there.
And so, I highly encourage you to take a hard look at your own family debt to do the same.
What can you spare per month for your debts? What can you sell right now to help you hack your way to freedom sooner? When can you pick up an extra shift or gig? What expenses can you slash? How can you make your necessary monthly expenses cheaper?
These are all questions that you need to ask yourself right now. And if you can do that, you’ll have a good grasp on what your financial goals are for getting out of debt.
For example:
- I want to get completely out of debt in 5 years
- My goal is to pick up one extra shift per month.
- I am going to sell off the unused pieces of the home gym and the second lawnmower.
- My goal is to cut all streaming services completely.
- My goal is to spend $50 less on groceries per month.
That will give you a good idea of how to create your own goal list.
If you make the goals, you have something to shoot for. You then know what you need to do to succeed. And if you don’t? Well, in that case, you’re planning to fail.
And that is something that neither you nor I want for you.
But what are your thoughts? Any helpful hints on creating financial goals? Do you think they work? Let us know in the comments below.
About Aden
Aden Tate is a regular contributor to TheOrganicPrepper.com and TheFrugalite.com. Aden runs a micro-farm where he raises dairy goats, a pig, honeybees, meat chickens, laying chickens, tomatoes, mushrooms, and greens. Aden has four published books, What School Should Have Taught You, The Faithful Prepper, An Arm and a Leg, The Prepper’s Guide to Post-Disaster Communications, and Zombie Choices. You can find his podcast The Last American on Preppers’ Broadcasting Network.
2 thoughts on “Financial Goals Help Get You Where You Want to Go”
Some concepts in addition to the above article
The article assumes that all debt is legitimate as stated to the debtor — and that is not always the case. One of the most awful examples is that of medical debt which drives many Americans into bankruptcy. Hospitals are notorious for double billing, erroneous billing, and billing for services not provided, etc. The average patient is not equipped to decipher the cryptic billing codes used to allege such charges. Nor does the average patient know there are organizations devoted to 1) negotiating such charges downward, or 2) teaching patients how to do that themselves.
In addition, each state has its own statute of limitations law that specifies how many years a debt collector can legally pursue a debtor — beyond which such debt collectors would be in violation of the relevant law. Often debt collectors will try to lay a guilt trip on the debtor to make even small/partial payments — without telling the debtor that such payments RESET or restart that state’s full length statute of limitations from day one again.
Another concept not often considered is that US contract law does not take into consideration the damage done to debt holders (whether hospitals, residential property lenders, etc) from the unpredictable future amounts of decreasing value of the US dollar as the result of “legalized” Federal Reserve counterfeiting of the currency. As the dollar loses value and such phoney/funny money ripples through the economy, the value of the debt holder contracts randomly drop in value while the debtor obligations become less and less IF their sources of income are steadily increased to cover the resulting inflation of prices for nearly everything. So depending on the extent of such future loss of purchasing power of the money, it may be very much to the debtor’s advantage to prolong the repayment of such debts as long as possible. That concept will never ever be allowed to appear in print in any government-screened public school textbook.
A little history demonstrates this effect. In 1933 FDR outlawed the private holding of gold bullion by US citizens within this country (excluding collector value coins and offshore-owned gold bullion). Up until that time American money was gold-backed and lending contracts reflected that. Immediately after FDR’s theft of private onshore gold … private lending quickly dried up and opened the door for later creation of Fannie Mae and Freddie Mac operations by government.
Another consideration is the uncertainty of the coming “cashless” digital economy where physical US money will be replaced by digital-only currency — which can’t work during inconvenient long term power outages. With digital currency … digital counterfeiting by the Fed can take place instantly via keyboard to feed the ever hungry warfare/welfare state. Whether the switchover to digital money will respect previously made contractual debt contracts (or whether such contracts might take a huge hit in value) is not yet known.
Finally … since the pricing of US medical products and services has exploded to the highest in the world (since Lyndon Johnson’s “Great Society” and Medicare intervention), many other countries have promoted “medical tourism” for access to far more cost effective medicine in their countries. As the result, it is a wise precaution to maintain a current US passport in case there is a future choice to be made between medical destruction of your financials in this country versus far more cost effective major medical services in some other countries.
–Lewis
There is smart debt and not so smart debt. A reasonable mortgage I have no issue with – buying more house than you can afford, much less need is not.
Lewis is correct re: medical debt – on the top of the list for bankruptcy filings if not the top reason. Even if you have decent/good medical insurance, medical costs can be onerous. Especially if the primary insured has little to no say over treatment – as in a premature baby or minor child. Rock and a hard place even if the medical system isn’t playing god or using your child as a guinea pig.
Over our adult lives, we’ve financed very little. Mortgage far less than what the financial world said we could afford which is now paid off. We bought more land paying cash. We pay cash for vehicles, new vehicles that meet our needs AND price range. By maintaining our existing vehicles we can save for the next one. At this point in our lives, we *might* buy one more new vehicle, we’ll see. The single credit card we have is paid off each month – a no fee, no frills, no “rewards” (I wish rewards were illegal).
The “secret” is to live below ones means. I do realize for some, it takes every penny to survive. But for others, it does not. As our income increased, we *never* increased our monthly expenses, even these days. Small splurges here and there but we paid for both kiddos college out of pocket – no borrowing. No matter how small the amount, saving something each pay period is good.