How to achieve long-term financial goals

In my last post, I talked about how personal finance is about playing the long game and “making choices that are harder in the short term for the good of the long term.” But when the payoff is so many years down the road, it can be difficult to stay on track. In order to actually reach long-term goals, you have to keep making the right choices day after day. How easy is it to fall off the wagon a week or two after you start a new diet, for instance? You need a game plan for the short term that supports your long game too.

Establish Priorities

Especially when you are young, there are just so many goals to strive for simultaneously. For example, Jake and I currently have the following goals:

  • House projects. We replaced our HVAC and decided solar panels aren't for us right now, but we still need to demolish a corroded metal shed and resurface our back deck.

  • Retirement contributions. Both Jake and I started late in the retirement savings department and need to contribute extra to make up for the compound interest we missed out on.

  • Emergency savings. In addition to the repairs and upgrades we planned, we've spent several thousand dollars on unexpected repairs. While we have always had enough cash on hand to deal with these situations, that means our emergency fund needs to be replenished constantly, not to mention the fact that we would like to beef up our savings account even further.

  • Student loan repayment. We have paid off all our credit cards and Jake's car loan, so our consumer debt is behind us. However, we still have student loan debt to pay off that is comparable to a regular-sized mortgage.

  • Pay down our mortgage/refinance. We had a somewhat compressed timeline for buying our house due to the fact that the condo where we were tenants went into foreclosure. Now that we are in our home for good, refinancing into a new loan where we aren't paying PMI would be smart.

And this is just a partial list of my goals! It doesn't include other common financial goals such as travel, starting a family, saving for a replacement vehicle, etc. Having many goals that compete for your limited attention and dollars can certainly make you feel like throwing up your hands and walking away.

This is where setting priorities comes in. Knowing what is most important to you can help clarify and tailor your short-term decisions to meet that goal. Similarly, determining which goals must be achieved sooner rather than later can help you prioritize and strategize. Putting your focus on one or two goals at a time may also help keep you motivated because you can make quick progress toward that goal.

Break Your Goals Into Achievable Mini-Goals

Sometimes the highest priority item on your list has such a long-term horizon that it is hard to stay motivated. It can help to break your goals into mini-goals that can be reached more easily and quickly.

This is something I struggle with in regards to my student loans. Because of the way my consolidation worked, I have two loans. One is for $30,000 or so and the other is in the neighborhood of $57,000. No matter how many extra payments I make, it feels like I am barely making a dent.

Jake, on the other hand, has four different accounts. Although in the end he owes a similar amount, right now he is targeting a loan with a balance of about $8,000 in his payoff strategy. He should be able to eliminate that entire loan this year. That's awesome! But when I compare my debt payoff to his, I feel jealous and frustrated that I won't have a similar achievement in the same timeframe.

Instead of giving up, however, I set my goals a different way. According to my 2015 goals post, my January student loan balance was $88,243.67. I set my payoff goal for the year to get my student loans under $80,000. This means my balance would start with a seven! That really gets me excited about making my payments! It also means that I would be making progress equivalent to Jake's achievement.

Motivate Yourself With a Personal Finance Buddy

The type of friendly competition or rivalry I describe above can be motivating for both parties. Can I pay off a similar amount of student loan debt as Jake even though my salary is considerably less than his? Jake isn't really too concerned about his loans and probably would make the minimum payment if left to his own devices. But he would feel pretty silly if he couldn't pay off at least as much as his lesser-earning partner! So he's been throwing extra money at that smaller balance. Win-win.

Of course, rivalry may not be the most motivating type of relationship for everyone. In fact, if the situation between two people is incredibly different, a sense of rivalry can make you feel like giving up even more. For example, if my debts were twice as big as Jake's in addition to our income disparity, I'd never be able to catch up to his achievements. Instead of motivating me, it might make me frustrated and even more likely to consider giving up. This means that it might be a good idea to try and find a personal finance buddy who is in a similar starting place as you and/or someone with similar means.

Another factor to consider when it comes to finding a personal finance buddy is personality. Some people might get overexcited by their success and gloat instead of encouraging their partner. It isn't very motivating to be told that the other person is awesome and you suck! I'd rather work with someone who could empathize with my difficulties instead of mocking them.

At the same time, however, you want someone to hold you accountable and call you out when you are not trying as hard as you could. It needs to be someone who will say, “Hey, I notice you only made the minimum payment on your student loan last month, but you went out to eat five times. What gives?” Sometimes we don't even notice when we are slipping into bad habits. Having a friend who will not only notice, but gently remind you that you have gone off track can be helpful.

Whatever Your Plan, Establish it in Advance

Reaching big, long-term goals such as getting out of debt or saving for retirement depends on how well you can persevere and meet your short-term goals. Staying motivated is key. So it is best to establish a plan at the outset for how to keep your motivation high. If you wait until you are already in a motivational slump, it may be hard to find your way out of it.

Are you trying to reach a lot of long-term goals? How do you keep yourself motivated when big goals can take such a long time to reach?

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Mrs. Frugalwoods
Mrs. Frugalwoods
5 years ago

My husband and I are working towards the goal of quitting our jobs and moving to a homestead in the woods of Vermont :). We’re about 2.5 years out, which feels like an eternity, but I fully realize it’s actually pretty soon. All of our financial decisions are focused towards that goal, which in some ways makes life easier, but in other ways feels frustrating because we do have another few years to go. We stay motivated by continually reminding ourselves of the life we want. We talk about our future homestead a lot, which helps make it feel more… Read more »

Honey Smith
Honey Smith
5 years ago

My family lived in VT when I was very young, and (totally randomly) my best friend and her husband and 3 kids live there now. It’s beautiful. VERY expensive, from what I hear.

Kim
Kim
5 years ago

That is awesome. I would say it’s ONLY 2.5 years out. 🙂

PJ Ryan
PJ Ryan
5 years ago

I agree with Mrs. Frugalwoods -it’s really hard to keep the momentum if you don’t keep your goals at the front of your mind. My husband and I were doing a fabulous job at saving when we were trying to save for a down payment in one year. Once we reached that goal, we lost momentum for a bit. We had to recalibrate our goals before we got back on track.

Beard Better
Beard Better
5 years ago

While setting up a rivalry, especially between spouses, seems like it is just powder keg of resentment waiting to explode, I am a big believer in the power of using social shaming against yourself. Even though my undergraduate student loans are subsidized, I have set a hard date of July 17, 2017 to save up the money to pay them off (although I won’t pay them off until I graduate, of course, since they’re effectively 0% loans until then). I published this date on my blog and told family and friends. I track my spending weekly and my net worth… Read more »

Honey Smith
Honey Smith
5 years ago
Reply to  Beard Better

Depends on your relationship with your spouse, I guess. I know some people it would work for and some it wouldn’t (ditto with friends).

Good luck to you, it sounds like your plan is working!

Fervent Finance
Fervent Finance
5 years ago

My goals are focused on becoming financially independent before 40, while still enjoying myself at the same time. Could I really buckle down and do it a few years sooner? Probably, but my little rewards for maxing out my 401k, Roth, etc. along the way are mini vacations. I just got back from a cruise, and it was great!

Alea
Alea
5 years ago

Living in Los Angeles, home ownership has been and is still out of my reach based on what I earn.

Therefore, I decided to concentrate on fully funding my 401(K) and Roth IRA and building a healthy cash cushion. In the next two years, I plan to open a taxable investment account.

Sticking to the first three goals, the results have been amazing. I’m a renter that does not live paycheck to paycheck.

Indy
Indy
5 years ago

My wife and I are setting the goal to pay off the house early. We are debt free, saving 15% of our income towards retirement, saving for our children’s college (2 yr. old and 7 mo. old) and any extra cash at the end of the month goes toward paying off the principal. By my calculations we could have it paid off in about 3-4 years. Hopefully less. I agree with the strategy of breaking a big goal into small ones. Watching the balance go down each month is a little boring but if I say lets get it below… Read more »

lmoot
lmoot
5 years ago

Visualization and mock trials. My 3 main goals are to go back to school for a specialized degree, build a portfolio of rental properties, and save/ create enough passive income to where I only need to work seasonally to support myself, leaving me 3-6 months per year free for travel, study, volunteer work, or to pursue personal projects (write a book, design, learn etc). I’ve always craved the life of an idealist and I have the imagination…I just lack the finances and the enormous amount of time it requires 🙂 As part of my “mock practices” I check real estate… Read more »

Quinn
Quinn
5 years ago
Reply to  lmoot

I like the visualization. A key to staying on track is to make goals that you want more than anything else. Goals that you can blame when you decide NOT to spend money – whether it’s friends asking, social trends asking, or just passing impulses.

Jason @addfinances.org
Jason @addfinances.org
5 years ago

Hi Honey, I have also struggled with keeping my motivation up when paying my student loans. I started with about $50,000 and am now down to $40,000 (4 years later) but it is hard to keep making the payments when you see the numbers fall so slowly. I found using charts in Excel to be useful because you get a visual representation of your debt levels decreasing. This motivates me to keep working at it. And interestingly enough, just thinking about the progress I have made over the last 4 years motivates me. I see the numbers falling and remind… Read more »

Nick @ Millionaires Giving Money
Nick @ Millionaires Giving Money
5 years ago

Great post. I like the way you break down your long term financial goals into smaller shorter term goals. I have used this strategy effectively however one point I’d like to make is perhaps making too many shorter term goals might overwhelm a person and therefore make them too tired to achieve the longer term goal.

Jason
Jason
5 years ago

I think having a personal finance buddy is great. I really wish I had one. My wife doesn’t like talking about it and I feel like I am alone, which is one of the reasons I think I started a blog, but having someone local would be great.

Jen
Jen
5 years ago

Setting mini goals does help. Our immediate goals this year are getting out of credit card debt by September, and rewarding ourselves with a cruise to Mexico in November – said Cruise was saved for with a sinking fund started last year. By the time we are aboard our cruise ship, the entire trip will already be paid for. Life is short, so goal-setting and rewards for reaching said goal are the way to go for me and my Husband. Next year’s goal will be paying down a car loan, building up a year’s worth of expenses and contributing to… Read more »

Derek @ Tools 4 Retirement
Derek @ Tools 4 Retirement
5 years ago

About 5 years ago, when my wife and I were in our late 30s, we decided to target 55 as our relatively early retirement age. My wife tasked me with coming up with a plan for how we could do it. So, I began the creation of our family finances excel spreadsheet with charts and all. We’re now investing as much as possible for our retirement, while still having plenty of family fun along the way. Our plan is what’s made it possible. Remember… Hope is not a plan 🙂

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