The following is a guest post from Ross at Cash Rebel. He’s a 20-something engineer who writes about frugality, sustainability, and stick-to-itiveness. He’s striving to reach financial independence by age 35.
I read a statistic the other day that claimed only 17% of people had long term goals, and only 3% have actually written down those goals. It went on to state that folks who write down their goals are 5X more likely to actually complete their goals.
A few years ago, I would have told you that these statistics were hogwash. That of course everyone has goals, most people just have a tough time achieving them. Over the past few years, I’ve thought (and written) quite a bit about my dreams for financial independence and what I want most over the next ten years. It’s changed my relationship with money and it’s helped me to focus on what really matters. It’s also made me realize that most folks never really take the time to set their long term financial goals. And without a long term goal, it’s difficult to form a cohesive, values-based action plan to get there.
Where Do You See Yourself In 10 Years?
Sure it’s an interview cliche, but it’s an incredibly valuable exercise to repeat every once in a while. I graduated from engineering school about three years ago and I’ve been working in the field of environmental sustainability ever since. So far I love it, but that doesn’t mean I want to do it forever. In 10 years, I’d like to be preparing myself for “retirement” from my traditional full-time job. I don’t know what it will look like exactly, but at that point I’d like to change my focus to either raising a family, being a high school science teacher, or running an environmental non-profit (I’ve got some time to figure it out).
I hope to have a net worth of around $700K invested in stocks, bonds, and real estate, yielding a safe withdrawal rate (4%) of $28,000/yr (22% more than I live on now). I plan to get there by saving 50%+ of my salary each year and investing it in diversified index funds and real estate. I’ve got an incredibly complicated spreadsheet, which you can see here, that I’ve used to set my goals. So far I’ve beaten my financial expectations for the first two years, so I’m hoping I’ll be able to keep it up. Sure, there are a ton of ways I could fail, or my priorities might change, but just having a goal with actionable steps to get there has made all the difference so far.
The Decisions I’ve Made So Far
My long term goal of financial independence has had an impact on a few key areas of my life. They aren’t gigantic life altering choices on their own, but when you put them all together, they make all the difference.
- My Housing Choice: I live in a reasonably nice apartment on the north side of Chicago. I’ve got a roommate, it’s no especially big or super fancy, but it gets the job done. If I wanted to, I could certainly afford a classier place all to myself in an expensive neighborhood right next to the fanciest bars and restaurants in the city. I could be closer to everything I like to do, but it would cost me about twice as much. Some of my friends have decided that living in the hippest area of town is most important to them, so they are sacrificing large portions of their paychecks to rent or buy. If I didn’t have clearly laid out financial goals, this would sound like a pretty appealing option, but because I’ve got a better use for my money (buying financial independence) I’ve been able to resist the temptation.
- Driving Is Soul Crushing: Driving is just a part of normal life for most people, and I don’t think we realize how much money and life energy it really sucks from us. Before I considered whether or not driving fit with my long term life goals and priorities, I drove pretty much everywhere. My commute was 30 miles each way in stand-still traffic. It was a mind numbing existence that actually ended up costing quite a bit in fuel, maintenance, depreciation, and impulse buys. Once I examined my long term priorities, I realized that driving really didn’t fit in my plan. It was a time and money suck, so I focused all my effort on finding a way to reduce the number of miles I drive. Now I’m commuting by train and biking/walking everywhere else. I’m driving about 4X less than I did before. Meanwhile my friends are upgrading their cars and dropping obscene amounts of cash, and going into debt into do it.
- Don’t Try To Beat The Markets: Before setting my goal for financial independence, I thought the stock market was like gambling at a casino. If figured the odds were stacked against you and the house always won. After reading a ton about the subject, my feelings on the matter have evolved. I understand now how the system works, and why index fund investing is a reasonably safe way to grow wealth over the long run (10+years). It also became abundantly clear that the fastest path to financial independence was not by picking winners (something average folks just can’t do consistently), but instead by consistently investing a steady amount in the whole market over a long time frame regardless of boom times or busts.
- Shopping: It’s fascinating to check out my Mint.com account and filter for shopping. Before I considered my long term priorities, I just bought stuff whenever I felt like it. It’s not that I was irresponsible with my money, I just never gave it a second thought when buying a souvenir, tee-shirt, or a cup of coffee. Because I determined that my long term frugality goals were more important than trinkets and knickknacks, I went on an impulse-buying diet. I dropped my monthly shopping allowance by 62% and I haven’t noticed a decrease in my quality of life. It was a simple but powerful change that has helped to streamline my spending.
- Enjoying Life: Before taking the time to examine what I truly wanted out of life, and my dreams about money, I pretty much assumed that buying crap made me happy. I knew it wasn’t a 100% correlation, but it seemed to make intrinsic sense that buying a new Ipad would increase my life happiness points quite a bit. Now I see that there’s almost no correlation between buying crap and long term happiness. Now I spend a lot more time outdoors, laughing with friends, enjoying nature and staying healthy. These are the things that increase my long term happiness points, and they cost next to nothing when you do it right.
Is That Enough?
Is it enough to have a somewhat ambiguous FI goal, and a 10 year action plan to do it? Who knows? So far it’s gone well but you’ll have to stay tuned for the next 8 years to see what happens.
Plenty of people set super lofty financial goals and fail. They burnout too quickly or never follow through on their action plan. But there’s the thing. Even if I fail in reaching 100% financial independence by age 35, I will have built up some passive income streams, reduced my unnecessary spending, and focused on what truly brings me happiness in life. That doesn’t exactly sound like failure to me.
The internet is also littered with examples of folks like Pauline who have succeeded and gone on to tell their tales. They are the people who’ve convinced me to give it a try. By setting large, hairy, long-term, ambitious goals and actually writing them down, I’ve built more than just spreadsheets and a game plan. By putting my goals on paper I’ve increased my chances of success 500%.
What long term goals have you set and actually written down? What goals do you want to accomplish that you haven’t written down yet?
This post was featured on Eyes on the Dollar, No More Spending, thank you!
I want to reach my financial freedom. I want to do what I love to do. I like having a passive income that can sustain our household expenses.
I want to see my self after 10 years from now having 2-5 business under my belt.
You and me both. 2-5 businesses sounds like quite a goal, but plenty of folks have done it before, so good luck!
Ross, you are right on here. Even in our currently tough situation, our written goals are helping us to achieve our financial goals in what many would deem an impossible situation. And I agree too about the lifestyle change being wonderful. Rarely do we miss having what we used to spend our money on. Instead, our peace and happiness are increasing because we are focusing on achieving something that we want more than stuff.
Laurie, it’s just so much easier to stick to your goals when they are written down in front of you. They make the sacrifices worth it, and like you said, eventually they don’t seem so much like sacrifices when you’re living life the way you want to.
I would like to see myself making a living from home in 10 years time. Although the realist in me says that there is a good chance I will still be working for the man in some way or another.
The realist in me says I’ll never be financially independent, but that’s why you gotta set big, hairy goals. You’ll never know if you can work from home if you never try to get there. Good luck!
I definitely want to reach financial independence. Hopefully it doesn’t take too, too long 🙂
With your side hustle, I can’t imagine it will take too long at all!
Ironically, despite writing down everything (I have multiple to-do lists each day that I update) I have not written down any goals further than a year or two down the road. I will have to think about where I want to be in 5-10 years and make sure that I’m moving in the right direction financially/career-wise/etc.
It’s funny how we sometimes get lost in the day to day, without thinking about whether or not our actions align with our 10 year goals. I do this all the time at work.
The goal for me is to make the income I was making at my old employer own my own in a lot less hours. I don’t think there is a way for me to make/maintain the amount of income I want to make passively. But 5 years from now I want to be free from all debt, invested in real estate and planning to move abroad.
Thomas, those sound like well thought out goals with a bit of realism. Best of luck on your journey!
Great stuff here. Ambitious goals are definitely a great way to push yourself to big achievements. Even if you don’t hit the exact goal in the right timeframe, the amount you learn and do achieve in that time will be well worth it. I’m certainly working on ways to make myself more financially independent so that me and my family can have maximum flexibility to live how we want. I don’t want to be missing things like soccer games and school plays because I have to be accountable to an inflexible boss. My actual goals aren’t as concrete as yours yet, but my wife and I will hopefully be getting those more set in the near future.
That’s the thing about big goals, even if you don’t quite make it, you’ve got some serious passive income coming in that buys you more options in life.
It’s crazy how actual written down goals really can exponentially increase the likelihood of success. I am such a visual person that seeing those goals before me just causes me to strive even more and work harder to reach them. I love that you’re using public transportation in Chicago. I lived there for five years, as a teenager, and you can get to so many places using it that it makes having a car being useless many a time.
I need my car for work every once in a while, but running around the city I just walk or take the El. It’s a great way to live!
Wow, you are getting around with the guest posts – that’s awesome!
For me, it’s about mapping out a plan more than just having a goal. I have check-in points and progress tracking and it turns into a series of sub-goals which feels more doable than just having one big goal far down the line.
I’ve also go annual benchmarks on my goal spreadsheet. I’m feeling pretty good because I’ve kicked butt on the first two years, but part of that is due to the awesome stock market returns that certainly wont be that good forever. But I think those annual sub goals will help to keep me on track.
I love your story, Ross. I think your goals are ambitious, but awesome at the same time. Just think, even if you fail and it takes until 37 to reach FI… you’re still only 37 years old! Not many people reach FI before they are 60, let alone in their 30’s. I think anything is possible with a set plan and you’re showing how that’s the case.
Thanks for the vote of confidence Jake. With enough determination, I don’t know why I can’t make it. And like you said, if I can stick to my plan I should make it well before 60 even with a few setbacks.
Great plan mate, and I like your post on how you’ll get there. No plan, no glory! Maybe you’ll fall short, but you’ll get much farther than if you had no goals pulling you closer.
That’s right! It should be a fun ride.
Very inspiring story! Some of my goals for 10 years down the road (that I’ve written down) are purchasing a house in cash, retiring from my full-time job, work toward starting a family, and taking my girlfriend to the Philippines to visit family she has over there for the first time. It’s nice to see someone else around our age working hard to obtain early retirement!
Not a lot of people purchase a house in cash, that’d be quite an accomplishment. They all sounds like great goals to strive for! Best of luck!
Your plan looks great and I’m impressed with your long term planning, discipline, and determination to make it happen! I appreciate the article, it put a few of those big scary words and concepts into little guy terms so the rest of us can see what it looks like and how it works. Good luck with your plan- time to revise mine a bit!
Thanks Troy! I hope I’ve got the discipline to make it happen. I’m only 2 years in, so you never know, but it’s been fun so far.
My goal of financial freedom had a detailed plan. I had daily/weekly/monthly tasks to help me meet my overall goal. I also monitored my progress and adjusted when necessary to reach my goal. It was a 9 year plan and I achieved m goal in 7 years.
Wow, that’s actually great to hear. Not too many people actually make 9 year plans and stick to them. That’s inspiring, thanks for sharing.
I have a fairly ambiguous FI plan. Now that the thing that has been taking up a lot of my mental energy and time (building a new house) is in the background, I would really like to get my plan more fleshed out.
Well I hope the new home construction is going well! All it takes is excel, a little math, and whole lot of dreaming. Let me know when you have fleshed it out.
Our goals are simple; we want to remain debt-free and to continue living our lives the way we want to live. We also want to reach financial independence at an early age…although we aren’t sure what that age is yet.
It’s got to be tough to make a long term plan when your freelancing (I think that’s what you’re doing when you work from home in your PJs, right?). Because you never know exactly how much you’ll make each year. At least because I’ve got a salary I can assume a 3% salary increase each year and whatnot. Sounds like a challenge.
Not really. There are two of us, remember?!??!?! I pay myself a salary and last month I only paid myself about 25% of what I brought in. Hopefully good months like that will outweigh the bad.
The 3% raise may sound like a good thing….but I’ve personally grown out of the lifestyle of wanting a guaranteed salary. I hated having my income limited by what someone else decided to pay me.
You are definitely right about writing down your goals. I don’t know why, but putting pen to paper just seems to make any goal that much more real.
And posting it for the blogging community to see. That way I’ll be shamed if I ever fall of the wagon, haha.
What a fine post, Ross, especially the bits about shopping and enjoying life. We bought stuff and we are mad as hell about it many years later. But we’ve written down nearly all our goals. For example we’ve down when our auto loan and home loan will be paid. One will be paid 3 years short of term, the other 13 years.
Thanks for the kind words. Those are great goals to have. Do you have any more ambitious goals to pay them each off early?
Thanks for asking, but no. We have our hands full trying to pay both loans off early. That’s the plan and those are our last 2 debts. After that, we can talk turkey about investing and the like;) Have a blaster of a day!!!
I talked a bit about goals today in my blog post about laziness. I do write down my long-term and short-term goals. I do this 1- so I actually complete them, 2- so they don’t start piling up, 3- to motivate me 4- to feel like I am not just settling for what life has given me. I believe that goals whether long or short are very important to my path in life and I’ll continue to visit them and like you say to check in with what we want to do in x amount of years more often than just when we answer it in a job interview.
I think we have our long term goals pretty well defined. We’re focused right now on finishing up our refinance, saving, then buying a house when we’re ready. After that we’ll be doing our best to pay off the house, continue saving for our kid’s college and fine tuning our retirement strategy.
Without the house we’d be in a good position to reach FI in the next 10 years, but that purchase will easily delay that by probably 8-10 years, which we’re willing to accept.
My long term goal has been financial independence at 35 as well. Unfortunately, I didn’t start aggressively until a bit later than you. That being said, I do try to do many of the things you mentioned – we don’t spend money on a car or spend our lives driving, we try to keep our housing costs reasonable, and shopping for the sake of shopping just doesn’t happen.
Sounds like you’ve really got your act together. I think I used to think more in these terms when I was younger, but then as time went on situations changed so frequently. I wasn’t expecting the layoff, or the recession, or to be single at 42…stuff like that. I wish I would have planned for such contingencies when I was younger because they can derail you. I’m nowhere where I should be as far as retirement, but at least I don’t have debt! But I often wonder about where I live and “should” I move somewhere else. I think my current long term goal is figuring that out.
I’m actually thinking of laying down a concrete financial plan for the next ten years. The plan would take us to when we are 33 years old. It would also help me stop worrying about the future if I have an action plan to track it.
We have a six year plan to pay off our house, stretch goal would be four years. During that time, we hope to add another rental similar to the one we have now. If we can do that, we should be free of the need to work. We probably will continue to work in some capacity, but we won’t have to. If I would have started at your age, we’d be there already, but sometimes the mistakes you make help you determine what your goals are. We didn’t have any when we got into debt, probably why it happened.
I can see myself almost financially independent ten years from now, that’s just my goal as of today and that’s why you should not always set your goals high enough, right?
I’m just working through the set up on a rather extensive 5-year plan. It’s really interesting how much you learn about what you TRULY want as part of the planning process!
I may not have a very sound financial plans as of now, but am trying my very best to be financially independent because I wanted an early retirement so I can do what I really wanted in life.
Due to a recent inheritance ( still tracking down the money) and the help of a financial planner I will be able to retire much sooner than I thought!
Awesome! You can do so much when you manage money wisely.
Ironic I was just reading some of your stuff today, thinking about the Chicago connection and how many things we are probably doing the same thing. I just started my blog, but I’ll make sure to stop by more often and compare notes. Thanks for article.
Hi CashRebel/Ross
Interesting post. I tried to check out your spreadsheets/website and other articles but for some reason none of the link seem to be working.
I am being directed to http://www.cashreb.com/?f and this domain is for sale.
Where can we find your website ?
I agree that writing your goal down is important. One of our goals is to become financially independent in less than 4 years. We’re right on schedule.