How to set financial goals like you’re training for a marathon • Part II
Practical advice from someone who doesn’t even run marathons but dreams big anyways.
**Disclaimer: I am NOT a financial advisor and I strongly recommend you consult with one before making any major financial decisions.**
Working toward your future without setting specific financial goals is like trying to run a marathon but without knowing a marathon is equal to 26.2 miles. Would you stop running after 25 miles because you’re “so damn tired and you worked so hard to get this far so you might as well stop here” if you knew you only had 1.2 miles left to go to reach your goal of achieving a marathon?! Hell no you wouldn’t stop! That last 1.2 miles might be full of painful, chest burning, legs of rubber agony, but you know how close you are to achieving your goal and you know you are going to make it damn it! You can’t exactly just run 1.2 miles next time and add that to your first 25 mile run and say you’ve now run a marathon. It doesn’t work like that.
The key to financial goal setting is understanding what new opportunities you are going to unlock along the way.
Setting financial goals is not just about simply saying you want to buy a house and hope that you can put enough money aside until one day there’s finally enough in your account to go buy a house. Time is also a factor because with each year that passes hoping to save up more, inflation and housing prices continue to rise. So while your hard earned money is sitting in a savings account, inflation is actually causing the value of that money to decrease and your dreams of buying a home continue to be seemingly out of reach with each passing year. So while you might think you’re running that marathon, you actually have no idea where that 26.2 mile marker finish line actually is. The key to financial goal setting is understanding what new opportunities you are going to unlock along the way.
Have you ever run a mile and thought, “Nah, running is just not for me”? (Raises hand 🙋🏻♀️) The first mile is always the hardest. Your nose is running, your lungs are burning, your legs feel like bricks. Most people know they can’t just run 26.2 miles from the start because their body and mind are not conditioned to do it yet. They might start with a more achievable goal like running a 5k. Achieving that first 5k unlocks your physical ability and mindset to run farther and faster for your next goal such as a 10k, then a half marathon, until finally you achieve your marathon.
Setting really big financial goals, such as buying a house or saving enough money to quit your job, requires the same amount of training and conditioning. For example, let’s say your goal is to buy a $500,000 house* in five years which means you will need $100,000 for your down payment. This is your marathon goal. Seems a bit scary and impossible right?
Let’s walk it back to see what your first 5k goal will be:
- Marathon = Buy a house in five years (save $100,000)
- Half marathon = Start investing (e.g. save $5000 to open an intelligent portfolio with automated investing)
- 10k = Pay off my debt (e.g. put 20% of saved income toward paying off your debt as quickly as possible)
- 5k = Reduce my monthly spending and living expenses to increase my savings by 20%.
- Run my first mile = Start learning how to be fiscally responsible.
There’s a lot to learn and the journey to reaching your marathon goal can be overwhelming at first. Consider hiring a financial coach/advisor that will ramp up your learning curve and give you the support you need to reach your next goal (many people hire a personal trainer for the same reasons when it comes to physical fitness goals).
Maintain a growth mindset if you start to feel overwhelmed. You are not stuck.
How quickly you will be able to run your first mile, 5k, 10k, half-marathon, and finally reach your marathon goal depends on many variables such as the amount of debt you have, your salary, your cost of living, and monthly expenses—and in today’s world there are even more factors of systemic oppression affecting people of color and marginalized communities to consider. Understanding all of these variables and how each of these factors impacts your ability and timing to reach your goals is incredibly important. Be realistic and be kind to yourself with each of these variables. Maintain a growth mindset if you start to feel overwhelmed. You are not stuck.
Here’s another example for someone who might already be out of debt and saving as much as possible but is shifting their mindset toward a more financially independent future.
In other words, let’s kick it up a notch:
- Marathon = Quit my job and retire early/run my own business
- Half marathon = Maintain multiple revenue streams with passive income and diversify your portfolio (e.g. continue high-yield savings, invest more in your intelligent portfolio, purchase a rental investment property, sell multiple products or services, publish content, establish new affiliate marketing channels, other freelance and consulting, etc.)
- 10k = Launch a side-hustle (e.g. start a blog with affiliate partner links, launch your business on Instagram or YouTube, get paid to speak—and travel!—at professional conferences, sell your custom artwork with drop-shipping. Whatever it is just do the damn thing and get paid for it.)
- 5k = Start investing and open a high-yield savings account (I am publishing an article next week about how to do this! Follow me to get notified.) Think beyond your regular savings account and 401k contributions.
But what if I don’t dream of running a marathon?
I get it. Some people’s dreams aren’t as straight forward as buying a house or maybe you don’t even know where to start launching a side-hustle. Not everyone is on their second marathon toward quitting their job and starting their own business (and perhaps you actually like your day job!)
I’ve never actually run more than a 5k. Not everyone wants to actually run a marathon, but we all have the potential to dream big.
Read Part I of this series to get motivated about your marathon goals:
*Average home price in California right now is about $530k so I picked a number more people can relate to but you can use this analogy and formula for any home value.