Setting and Achieving Financial Goals

For three years I've had a single goal directing my actions: I wanted to get out of debt. Now that my consumer debt is nearly gone, I've spent a lot of time wondering what to do next. I was worried that I'd lose focus, lose direction. That's not going to be the case. I've set three major financial goals for 2008. After I pay off the last of my final loan next Tuesday, I intend to:

  • Max out my retirement plan for 2007 and 2008.
  • Pay taxes.
  • Bolster my savings.

These goals are ambitious, but I think I can achieve them. In fact, I hope to do even more.

Retirement
I got a late start on my retirement savings. The box company has been setting aside a pension for me, but I only began my self-directed retirement savings last year. I managed to make the full contribution to my 2006 Roth IRA. I've contributed $2,000 so far this year, and intend to max out my plan by the middle of December. In 2008, the contribution limits on Roth IRAs increase to $5,000/year — I hope to invest this amount.

It wasn't until I started writing Get Rich Slowly that I understood the value of saving for retirement. I'm now convinced that it's the most important financial move a person can make. Even if you screw up every thing else, if you make regular retirement contributions, you'll have a safety net at the end of your life.

Taxes
Last spring, my accountant asked me how much I expected to make from Get Rich Slowly in 2007. “I don't know,” I said. “Maybe $2000 a month.” It was a pipe dream, and I knew it. The site was only generating $1000 a month.

“Fine,” he said. “We'll set up estimated tax payments. Every quarter you'll mail $1790 to the IRS, and $320 to the Oregon Department of Revenue.” I figured that I'd be overpaying, which would mean I'd get a nice tax refund. To my surprise, however, I've earned twice as much as I had hoped. This is a nice problem to have, but it also means that I've badly underestimated my tax obligation. I need to come up with about $8,000 by April 15th!

Saving
I'm a natural worrier. My upcoming transition to “professional blogger” gives me plenty of things to worry about. I'm making enough to support myself now, but what if my readership declines? What if I lose the muse? To cope with possible problems, I want to build an emergency fund — an enormous emergency fund.

In my dream world, I'd save $20,000 by next winter. Unless my readership doubles overnight, that's not going to happen. I'll keep that figure as an eventual target, but I'll be happy to have saved $5,000 or $10,000 by the end of 2008.

Other goals
These aren't my only financial goals, of course. I still dream of buying a MINI Cooper — but I'm going to save for it. I also want to do some work on the house — paint the exterior, upgrade the electrical system — and to buy a Stickley chair. I'll regularly set aside small sums of money for each of these things.

Goals are crucial. They facilitate smart choices. When you know that you're saving for a down payment on a house, it becomes easier to forego a new pair of shoes or the Justin Timberlake concert. It's amazing the creative ways you can find to save money when you want to buy a new car. And when you finally make the decision to get out of debt, it no longer seems a hardship to shop at thrift stores or to cook at home. You come to recognize these things as a means to an end.

As we approach the new year, set some financial goals. Set a short-term goal, a medium-term goal, and a long-term goal. Make your goals specific, measurable, attainable, realistic, and timed. If you do this, and if you keep these objectives in mind whenever you face a financial decision, I think you'll meet with a level of success that will surprise you.

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More about...Budgeting, Planning

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jim
jim
12 years ago

Justin Timberlake concert??? Seriously???

The Saving Freak
The Saving Freak
12 years ago

My goal is to replace my wifes teachers salary with passive income (blog, extra business deals, new business ventures, etc). We want to have children soon and I would like to see her be able to stay home if she wants.

Justin Timberlake
Justin Timberlake
12 years ago

Of course. J.D. has been a big fan of mine since I was on the New Mickey Mouse Club. He’s always in the front row at my Portland concerts!

JB @ GetRichOrDieTrying
JB @ GetRichOrDieTrying
12 years ago

I’m sure you’ll achieve your goals as long as you keep your eyes on the prize. Unfortunately, my goal, is the blasted ‘getting out of debt’.

Mitch
Mitch
12 years ago

Here’s a request for a future post: how do you make your blog successful? It’s fascinating to me that you can generate this kind of income from writing at home. I’ve never considered trying to earn money from my blog, mostly because I’m not convinced anybody reads it. I don’t even know how to check the readership numbers, let alone grow them.

Obviously, the single most important thing for a successful blog is great content. But what else is there?

Jeremy Bettis
Jeremy Bettis
12 years ago

Why did you guess at your quarterly tax payments? Since you mail them in at the end of each quarter, you should know exactly what your income was for the previous 3 months. There should be no reason for an unexpected tax payment.

David
David
12 years ago

I’ve been saving the past few months for Lasik eye surgery. I figure in the long run, paying for that will be cheaper than going to the eye doctor and getting new glasses every year or two. It’s helped me not spend as much money on fast food and what not. Drives my girlfriend crazy because I don’t want to go to the movies, but I feel good about it.

Ryan
Ryan
12 years ago

@Mitch – You’re exactly right. Great content ‘that is made for humans’ is the single most important thing. It will come more naturally and be more fulfilling (I believe) if you write for people and sharing of knowledge then for the money. Oddly enough, this way the money will soon follow.

It does however take time and some hard work to get going. I would recommend you check out this site: http://www.problogger.net/ it has lots of great tips and resources on what you are looking for.

Plan Your Escape
Plan Your Escape
12 years ago

Those sounds like great goals JD. It must feel very satisfying to have achieved the first goal and now to be looking for new ones. Congratulations on your success and good luck!

Peter

Susy
Susy
12 years ago

We are self-employed and I figured out what percentage of our business income should cover taxes. Whenever we get paid I put that money in an ING savings account. Every quarter I send in my payment. I overestimated a little so hopefully I’ll have a little left in the account come tax time, if so – into retirement it goes. I’ve also earned an extra $200 in interest on my tax account (ha take that IRS!).

MoneyChangesThings
MoneyChangesThings
12 years ago

I love your line “Goals are crucial. They facilitate smart choices”. In fact I have read that people with ANY financial plan have better outcomes than those with no plan at all. A plan focuses your attention. As I often muse about, what happens after you achieve financial stability and have accomplished your goals. The first MiniCooper will be a thrill, but the second one won’t. I just decided to run a workshop this January for folks to craft a Financial Mission Statement – the role that your money plays in your life, and how you align your money with… Read more »

J.D.
J.D.
12 years ago

Jim, the Justin Timberlake thing is a joke. No offense to anyone who likes JT (I’ve never actually heard any of his music, and so have no opinion), but I thought it was a funny example. Jeremy, this is my first year with quarterly payments, and I didn’t realize that I could send in more than the amount listed on the payment coupon (which was pre-prepared by me accountant last winter). I’m smart enough to realize that I had extra tax coming, though, and under normal circumstances I would have saved for it as I went along. Getting out of… Read more »

Rhonda Porter CMPS
Rhonda Porter CMPS
12 years ago

Congratulations! This makes me contemplate allowing ads on my blog….so far I’ve resisted temptation.

Adeem Zafar
Adeem Zafar
12 years ago

I had a question….is it better to put all available funds towards paying off debt and then continue to save once it is all paid off or should I save and make payments at same time?

Jason
Jason
12 years ago

I just had a realization last night about how my financial situation is about to change. I am in the process of buying my first home, and I’m a little freaked out about the size of the obligation I’m taking on (I’m otherwise debt free), but something else excites me. For the past couple of years, all extra went directly into the savings account, saving for a down payment on a home. Now that we’re buying the home, we have more options for saving for retirement, or education, or even a big TV or vacation (we’ll focus on retirement and… Read more »

Jeff
Jeff
12 years ago

I recently heard some good money advice for self-employed people. “Get a separate checking account for your business”. That way all of your income from your business (blogging) can go into that account. Then when you have expenses (paying for hosting, domain names, etc.) take the money out of that account. Then, when you make withdrawls for living expenses, make sure you move 25% of that amount into a tax savings account. At the end of the year, your profit is what’s left in your business checking account. The amount you already owe on taxes is in your business tax… Read more »

Heidi
Heidi
12 years ago

Jeff is right on track suggesting the separate account for your business! Talk to your accountant about the advantages of filing for a EIN and incorporating vs. staying a Sole Prop w/ your SSN.

Congratulations on all of your success. It gives me something to strive for!

We have similar tastes – I want to buy a MINI for my fiance (nothing but a dream right now), and have been coveting that same Stickly chair for years!

Heidi
Heidi
12 years ago

Jeff is right on track suggesting the separate account for your business! Talk to your accountant about the advantages of filing for a EIN and incorporating vs. staying a Sole Prop w/ you SSN.

Congratulations on all of your success. It gives me something to strive for!

We have similar tastes – I want to buy a MINI for my fiance (nothing but a dream right now), and have been coveting that same Stickly chair for years!

10KPortfolio
10KPortfolio
12 years ago

Paying off the debt must have taken a huge weight off of your shoulders…Congrats.

I am sure you can meet your savings goal for this year.

Anna
Anna
12 years ago

I, too, would love to know how to generate that kind of money with a blog.

I love your site; thanks!

Erin
Erin
12 years ago

JD, you might want to make sure you don’t have to pay that by Jan. 15. I believe the rule is that you’ll pay a penalty if the tax due is more than 10% of your total tax or something like that. (Ask your accountant.) I didn’t realize that and got wholloped with a penalty because I waited until April 15 one year.

SJ
SJ
12 years ago

The penalty is also usually tied to whether you paid est. tax last year – if you paid what at least what you would have last year in est. tax, there should be no penalty (at least as of a few years ago in MA, when I last filed estimated taxes)

handworn
handworn
12 years ago

You should look for Stickley chairs used, on eBay. (Remember the completely consumed increment!) This rocker is $399:

http://cgi.ebay.com/ANTIQUE-GENUINE-STICKLEY-MISSION-OAK-ROCKING-CHAIR-NJ_W0QQitemZ260187246170QQihZ016QQcategoryZ63567QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

and if it must be fixed-leg but not a labeled Stickley, this new one is even less and has got to be a lot cheaper than Stickley’s:

http://cgi.ebay.com/Leather-Wood-Mission-Craftsman-Morris-Recliner-Chair_W0QQitemZ330191420101QQihZ014QQcategoryZ20491QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

Tracey
Tracey
12 years ago

If you want to start saving for things like retirement or an emergency fund, start small. Start putting $100 a month into a stock fund.

You can do so cheaply through Sharebuilder.com. And stock investing is fun. Buy what you know (Starbucks, Apple, McDonalds etc.)

If you start small, you’d be surprised at how fast even $100 a month accumulates. It won’t seem so scary or intimidating then.

Dividends4Life
Dividends4Life
12 years ago

It always tickles me to see someone take a step toward becoming debt-free. Keep working toward your dreams!

Best Wishes,
D4L

i-endeavors.com
i-endeavors.com
12 years ago

Excellent post, J.D.

Considering the income your site is generating now and that, for now, you are still working full time, you should have no problem reaching these goals and a lot more.

Frugal Bachelor
Frugal Bachelor
12 years ago

What a wonderful, well-written, concise post – striking the perfect balance between some personal insight and common-sense, rational, applies-to-everyone advice. Frugal Bachelor is the type of guy who can do anything he sets his mind to, and when he focuses on a goal, he will get it done – and he has been successful setting and meeting financial goals. He also recently came to the same conclusion as JD did regarding retirement and plans to focus on that for his next goal (but JD said it much more eloquently).

fathersez
fathersez
12 years ago

This is a great post.

Having clear goals, will focus the mind like a magnifying glass focuses sunrays.

I wish you all the best and may your goals be achieved much earlier than your set target dates.

jcsmoneyblog.blogspot.com/
jcsmoneyblog.blogspot.com/
12 years ago

Interesting goals JD. I was surprised to see “pay my taxes” as a goal! But that does make sense, since you don’t know what your future income will be (hopefully even higher than now), you can’t accurately predict your taxes, since you don’t know what tax bracket you’ll end up in. Maybe you should set up a seperate savings account where you put in the percentage of your revenue that you would have to pay in taxes, if you were to earn at that level all year. I.e. in big months you put in a higher percentage than lower months.… Read more »

MossySF
MossySF
12 years ago

I don’t think you will have to worry about penalties for underpaying taxes this year. There are 2 safe harbors for underpayment — you withhold more than your tax liability from last year or you meet 90% of the liability for this year. It sounds like the extra quarterly payments will get you above what you paid last year — especially if you got a refund last year and did not make any changes to your regular employment withholding.

Patrick
Patrick
12 years ago

JD, solid goals. In my opinion, the first step is defining your goals, then determine if they are realistic. You’ve got a good plan in place, and from reading your blog, I know you have the desire and discipline to achieve your goals. Good luck!

TosaJen
TosaJen
12 years ago

Goals are the “big plans” based on values and dreams, and plans are the day-to-day tasks to get to the goals, based on practicality and circumstances. If you don’t have the goals, how are you going to recognize opportunities that will help you achieve your dreams, even when they require you to change your plans? “If you don’t know where you are going, any road will take you there.” — Lewis Carroll Based on our experiences, we totally believe in setting goals and making plans. They don’t all pan out, of course. However, we’re closer to the life we want,… Read more »

SR
SR
12 years ago

It’s best to put aside a set amount of your income, pay the estimated taxes, and save the rest for the end of the year (this is what I do) — especially if you don’t expect to receive a significant amount in deductions for supplies and expenses. When you know you’re making twice what you initially estimated, making only the estimated payments and not saving extra money for taxes (or having your estimated payments adjusted) is a bit careless. Really though, your accountant should have said something to you like “if you end up making more money, put aside x%… Read more »

Raj
Raj
12 years ago

‘ If my saving is 50% per annum, then 1) what will be my financial goals? 2)what will be its assets class? 3)what will be the weight & proportion for that? 4)why should i invest in that particular mutual funds? ‘

Harry
Harry
11 years ago

You may also check out GoalsOnTrack.com, a very nicely built web app designed for tracking goals and todo lists, and has time tracking. It’s clear, focused, easy to navigate, worth a try.

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