Financial Fluency Episode #44: Setting Financial Goals

Today I’m talking about goal setting. I feel like there are a lot of different ways that different people like to tackle the issue of financial goal setting. Because I tend to work with women who are either starting their own business to leave a traditional nine to five job, or they have been out of the traditional nine to five working atmosphere for some time – either for caregiving responsibilities or other things – and want to start their own business as a way to restart their careers, I take a slightly different look at financial goal setting than a lot of other people do, and I wanted to share that process.

You can listen or read below and Tweet it out here

What I like to look at are four different levels of financial goal setting.

• Sustain
• Maintain
• Next level
• Dream level

Sustain

For sustain, I like to look at the absolute bare minimum expenses that you need to cover in order to not have to make a drastic change in your lifestyle like moving to a place with a lower rent or mortgage, or taking your kids out of the school they’re enrolled in. If you had to cut everything you could possibly cut if something happened, what would you still need to pay?

These are the things that keep the lights on and the engine running, things like mortgage or rent, homeowner’s or renter’s insurance, car payments, fuel for your car, car insurance and basic groceries. If you have an online business, the internet is included in that, and running your computer and your electricity. If you take your absolute minimum baseline expenses, that’s your sustain level.

If you’re looking at how much you need to be able to make on the side before you leave your corporate job, for instance, a lot of people aren’t able to actually replace their corporate income or their nine to five income with their side gig until they leave that job, because you only have so many hours in the day. You often can’t dedicate work hours to your side gig, you can’t do consulting calls while you’re at work, so there’s only so much that you’re able to do.

I often think it’s a good idea to at least build up enough of your sustained level goal for several months before you leave that job or be consistently making enough to cover the sustain for several months before you leave with a savings cushion.

Maintain

The next level I like to look at is maintain, so maintaining your current lifestyle.

For instance, again if you’re looking at leaving a job in order to do your side gig full time, you not only want to know the numbers for the absolute bare minimum, you want to know the numbers that you’ll need to be making in order to maintain your current lifestyle.

That adds on things like eating out, extra groceries, entertainment, extracurricular activities for the kids and yourself, just the more expensive things that make up your daily life and make it pleasurable and the way that you want it.

Things like getting your hair done in a nice salon, as opposed to the discount hair cutters in the mall, things that are nice to have, that you want to continue to have in your life, you don’t want to have to cut them, but if the worst came to the worst and you had some sort of catastrophic event, these are things that you could cut at least for the short term in order to get yourself back on your feet.

Next Level

After that and once you know what those numbers are, the next level of goal setting that I like to look at is what I call next level.

These are the upgrades you want to make in the next three to five years:

• To be debt free,
• To save up for a down payment on a house,
• Maybe you’ll need to replace your car
• Or get a new computer,
• Pay for tuition for a new school for the kids,
• One of your kids is starting college so you’re saving up towards that,
• An overdue vacation,
• Maybe you’re planning for a wedding in the next few years
• Helping one of your kids with one of their dream projects
• Maybe you’ll have a new dream project you want to do yourself
• Perhaps you want to start travelling more

It’ll be things that you see happening in the next three to five years that you want to start saving for and putting money towards.

Dream level

The dream level goal is more than three to five years out, it’s looking towards retirement, whether that’s early retirement or at retirement age, possibly a time when you want to be able to hustle less, have your income coming in through more passive channels, have your life set up in the ways that you want.

For some people this is moving up to a dream house, maybe having a dream car, buying a sports team, buying a vacation house, or just having enough so that you know that you’ll have a steady income from the principle that you’ve saved up at some point in your life.

If you have big dreams for your dream level goals, go and actually put dollar amounts on them, and that goes for next level goals too.

I like people to put real dollar amounts on everything that we look at working towards, so just like in the sustain and maintain levels where you’re going to write down exactly how much you want to be spending on each of those things, or how much you are currently spending on them, do the same thing for the next level goal and the dream level goal.

Let’s Get Real

Having real numbers to look at is what starts making those goals real and means that you can start putting money towards them. I feel like the best way to work towards all of these goals is firstly to know exactly how you’re covering both the sustain and the maintain goal as you’re working towards covering all of this with your own business or freelance career, or whatever it is you’re working towards, and then doing the same thing with the next level goal.

Start planning on how you’re going to expand.

• Are you going to offer more products or services?
• Are you hiring more people to work under you?
• Are you planning on adding some revenue streams?

Start figuring out how much you need to start putting towards those things month by month and year by year to get to them in the next three to five years, and then to get to them in the next ten to 20 years after that for the dream level goals, and maybe it won’t take that long.

The good thing about this is as you start tracking your progress towards these different goals, you can adjust the timeline for each of them. You can see how long will it really take, and as you add more income streams or more projects or expand in different ways, the timeline on those different goals can change dramatically, depending on what it is, especially when you’re looking at things like paying off debt or saving up for a house, those sort of nearer term goals.

Changing the monthly amounts that you put towards each of those can have a really big effect, and it’s exciting to see. Some of my favorite calculators for looking at this stuff are at bankrate.com, and I also just created a new calculator which I call The Bottom Line Calculator, on my own website.

I’m starting a new program soon that’s going to be called Accountable, helping us all to be accountable for the things that we want to do and how to track towards those goals.

It’s All Figureoutable

If you do have a product or service based business, you can go to that URL and it allows you to fill in your different products and services and have the prices there and adjust the number of sales you need per month or per quarter or per year. It then lets you also look at how much you should be setting aside for taxes out of those, estimating how much your business expenses are. You can then look at your sustain and maintain expenses to figure out how much bottom line you need to be able to bring home in order to cover your sustain, maintain and next level and dream level goals.

Once you have real numbers for all of those levels – and that can change over time, of course, as you meet some of these goals and they get knocked off the list – then you can add other things, you can change other things, you can move where that money goes to. Say you were saving up for a down payment on a house, once you have the down payment, that’s a big goal that you’ve saved up for and you have a mortgage now, but you no longer need to be saving as much as you were probably saving to get the down payment.

Or again if you’re saving up to get out of debt, once you’ve gotten out of debt, now all that money you were putting towards debt before, all of that can go towards your next level and dream level goals.

It’s pretty exciting to see, and I’m planning on building a suite of calculators there on the ‘accountable’ area of my website to help people really look at these things.

We’re going to be adjusting it so that you can track the progress towards these goals over time and really see how the timelines change. So far we just have this one bottom line calculator, but I would love it if you would go and check it out and give me your feedback. Send me an email, let me know if it’s helping you, and I’d like to hear about what you’re working on in your life and your business. What are your goals? What are you working towards right now?

If You Want More

I’m going to keep this one short and sweet, it’s just a quick rundown of how I look at goals for the women that I work with as clients. If you’re interested in finding out more, I have a fantastic group program called the Mastering Money Matters, which is a monthly membership group.

There is a library of content that you get access to which we work through together, but it’s been really interesting watching this group evolve over the past nine months.

At first I thought it would just be about the content, but really what’s ended up happening is we’ve sort of evolved as time has gone by and people have asked for more things, and now we do a Blab every Tuesday where we talk about the businesses of the different women in the group, we usually have a couple of people in the hot seat and focus on them, and then we all share it with our networks.

On Fridays we have a private Zoom where we get together in a Zoom room and either work on financial tasks or we can brainstorm or do Q&A or sometimes people just want feedback for what they’re working on, just to find out what we think before they put it out to the public.

It’s been a really great group, I really enjoy all the women in there, so if you’re interested in finding out more about joining that, click here.

If you like this show, I would very much appreciate it if you would subscribe, rate and review the show on iTunes.

We also have a free Facebook group where we carry on discussions after the episode. I would love to hear what you think about this episode and others you’ve listened to, I really appreciate getting any feedback from listeners. Come on over and join us, thanks so much for joining me today.

Jen.x