Link Your Financial Goals to Results, Not Numbers
When you are in the early stages of your personal finance journey, most of your financial goals tend to revolve around specific numbers:
I need $ 12,000 in my savings account for a three month emergency fund.
I need to pay off my student loans in the amount of $ 45,000.
I need to deposit 10% of my salary into my 401 (k).
I need to invest $ 6,000 in my IRA by the end of the year.
Once you start achieving these goals, you’ll probably set up a few new ones — and you’re probably going to structure them in the same way. “I need a three-month emergency fund” becomes “I need a six-figure net worth” and so on.
However, as The Financial Diet reminds us, personal finance is about more than hoarding a lot of money.
Business Insider asked Financial Diet co-founder Chelsea Fagan to elaborate on this philosophy:
Money, according to Fagan, should be seen as a way to facilitate a good life that provides things like safety, comfort, freedom, opportunity, and sometimes risks, rather than material to hoard.
There are two reasons why focusing on what you are doing with your money is more important than how much money you have .
First, because it is always wise to have a plan for your money. Sometimes there is a special plan: maybe you save for retirement, for a down payment, or for a once-in-a-lifetime vacation. Other times, you are saving and investing money now because you need more options in the future. (It still counts!)
Second, because setting your financial goal in terms of outcome rather than quantity can often help you find ways to achieve that outcome while spending less money. Telling yourself that you need to save $ 75,000 before, for example, you can make a down payment on a home is not the same as telling yourself that you want to find and buy a home at an affordable price.
Likewise, setting a goal to “visit Paris” instead of a goal to “save $ 5,000 so I can visit Paris” can help you find ways to make travel less expensive – and get you to the Eiffel Tower even faster.
How do you structure your financial goals? Do you tend to associate them with numbers, actions, and experiences? If you’ve changed your biggest financial goal and based it on the outcome, not the amount of money, even if that means you are thinking, “I want to be debt free” instead of “I need to pay off $ 3,000 of credit card debt,” “Could you find a cheaper way to get there?