Are you DAFT?

Developing and achieving financial targets is a great way for anyone living in the wealthiest countries to really feel wealthy. We live in one of the greatest countries on earth [America?] with the potential to earn a comfortable life, but there are two really important factors that hinder this opportunity.

I’ve talked a lot about forming sustainable habits and minimalist thinking in order to reduce poor planning (goals) and money management (budgeting) in all areas of our lives. In a consumer-driven society, companies spend enormous amounts of money on advertising to encourage overbuying through product placement and availability which all add to less money in your pocket! Let us consider setting up some goals and defining what each goal represents with respect to how much time it would take.

Time Frame Goals

There are really only three types of goals anyone should set and it’s all based on the amount of time someone is going to spend achieving them.

  • Short-term goals are goals that are going to be achieved in less than two years 

These types of goals include paying down small amounts of debt on your credit card or going on a trip (my favorite type of spending)

  • Medium-term goals are goals between two-five years

These goals are for building a sustainable emergency fund, credit card debt using balance transfers, or upcoming large purchases (think new gadgets, furniture, etc)

  • Long-term goals are considered more than five years 

The goal here is to think of planning for your kids, retirement, massive purchases that take a considerable amount of planning and thought and requires you to leverage all your small and medium goals to achieve the big goals (snowball effect)

How To Define Your Goals

The key to successfully achieving your long-term goals is by coordinating the short and medium-term goals to coincide with the longterm goals (I know I just said that but its very important). We are playing a game on inches and achieving our small goals keeps us moving forward in the right direction.

I want you to think of what types of goals your setting are they personal or financial. Consider two distinct buckets: Short-lived and durable goods.

Short-lived goods to me are considered things that don’t last very long like wearables, entertainment, and travel.

Durable goods are usually more expensive and last longer such as furniture, homes, cars, and equipment

Why is this important? your goals are the focal point for defining your plan and ability to track your progress in saving and spending. Using a commonly known approach: SMART. We can further define the goals into actional steps and can be used for life events too.

Specific – define your goals and tailor it

Example: I want to save for my vacation to Brazil

Measurable is being able to quantify ($$$) the goal

Example: I want to save $5000 in 12 months for my trip that covers the cost of accommodation, airfare, and transport.

Actionable – What steps are you going to take

Example: I will buy a metal container that can only be opened by breaking it and put $420 into the container each month.

Realistic – Base the goals on your financial situation and don’t make them absurd

Example: Don’t kid yourself and save you will save an amount you know you will burden yourself with and break the habit of saving!

Time – I already said this, but define the time frame you want to achieve the goal.

Full Example: I want to save $5000 (M) for a trip to Brazil (S) in 12 months (T) and I’m going to buy a small container from Amazon for $10 that cannot be opened without breaking it (A). I can do this because I will save only $420 dollars a month and I have no debts to pay besides my mortgage and car payment (R).

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