For many people, the new year is an opportunity to start fresh, often with a list of lofty goals and desires. Setting financial goals can be a critical step towards achieving financial independence and a secure retirement.
While goals are an important step, there are a couple of key ingredients to consider when outlining your goals for the new year. These will help you achieve the success you are aiming for, while also living your ideal life in the present.
Create a timeline for your goals
As a financial planner, one of the most pressing conversations I have with clients is around when they can retire or, stated differently, stop working on a full-time basis. It is such an important piece of a well-crafted financial plan but can be downright scary and confusing for many.
I like to start with a very simple question – when do you want to retire? I am often surprised that many people haven’t given this question serious thought, and the default answer usually ties to the age they can receive Social Security.
Just for the record, I don’t think there is anything wrong with retiring at the age chosen by the Social Security administration way back in 1935, when the average life expectancy was right around 62. In fact, I don’t think there is a wrong age to retire at, but I do think a successful retirement begins with an intentional conversation around what age you would like to retire, and most importantly, why.
Once you’ve picked a retirement age, you have a target to shoot for; a specific time frame and date that you can begin to work towards.
Begin to visualize your goal
Staying with this idea of retirement, the next step towards achieving your ideal retirement is to visualize what it will be like.
Here are some thoughts to consider:
- Where will you live?
- What will a typical day or week look like for you?
- Will you be retiring completely, or still working in some manner?
- Any old hobbies or new hobbies that interest you?
- Will you travel? Where to and how often?
- Where will you spend your winters or summers?
- How about volunteering for a cause that you’re passionate about?
- Is it more important for you to retire earlier, or to retire knowing that you will never have to work again?
All of these questions can begin to form a vision for your unique retirement. The important piece here is to begin to see what the details of your retirement goal looks like.
Visualization is a powerful piece to achieving your goals because of the way we are wired. Our brains are wired to keep us alive, right here and now. This puts the majority of our focus on the present moment, often at the sacrifice of the future. By visualizing our ideal retirement, we can “trick” our brain into feeling like it is much closer to the present. No different than the experience of planning a vacation in six months. How good does it feel the moment you put the date of your vacation on your calendar?
The real beauty here is to find the balance that works for you. To live a life that you enjoy today in the here and now, while also providing the means to provide yourself the opportunity to retire in a strong and secure position.
It’s fun to imagine that someday in the future you may thank your “younger self” for the intention and effort you’re putting in today.
Last but not least, just get started
I can’t tell you how many people I’ve met that never got started saving for retirement because it felt too hard to understand. They weren’t sure exactly how much they would need, or if they had factored in inflation, or if Social Security would even still be around for them down the road. They suffered from paralysis by analysis.
You don’t need to get it perfect before you get to work. You just need to get started.
I like to think of retirement as a purchase that needs to be paid off, just like your house. Before you own your home outright, most people make payments on a mortgage. Similarly, before you can âownâ your retirement, you make payments on it as well. These payments are usually directed in places like IRA accounts, 401k plans, ROTH IRAs, etc. Once you get to retirement, you flip the switch and instead of paying into them, these accounts start paying you a retirement income.
The interesting thing about this retirement payment plan is that the earlier you start, the easier it is to pay-off, because of the power of time and compound interest.
Don’t wait until you have the perfect plan to begin setting aside money for your future. Even setting aside a small amount each month goes a long way if you start early enough. You can always raise the monthly amount as time goes by. The most important thing to do is – get started!
Setting financial goals are a powerful tool to reduce stress and enjoy life more. By identifying a timeline with a little bit of visualization, you will begin to see your actions aligning with your future plans. Once your actions are in alignment and you are doing the things necessary to be on track for the future you desire, much of the concerns about enjoying money today subside or disappear completely.
The decisions and actions that you take today are going to define the life that you’ll live tomorrow. The trick is to balance a full and satisfying life today, with a life that someday you will reflect upon and thank your younger self for.