Financial Focus Can Make the Difference Between Goals Made, and Goals Met.
If you’re reading this blog, you probably have some financial goals. With what seems like so little time to get things done, financial goals can suddenly overlap:
- You may want to pay off student loans in the next 4 years…
- … while saving for a new car that you hope to purchase in a year or two.
- Simultaneously, you realize you need to add to your retirement fund.
- Speaking of retirement, you definitely don’t want to still be paying off a mortgage on your retirement funds. Maybe you should aim to pay the mortgage off in about 10 years.
A fantastic article on Stacking Benjamins pointed out exactly why you need to sketch your goals out. Doing so will make it clear that such lofty, overlapping goals will put a huge financial strain on you. Unless you add some serious income streams, your budget will be stretched thin, and your chances of success will be diminished.
In order to succeed at your goals, you need to find financial focus.
Narrow your focus.
Every hypothetical goal mentioned above is important. However, without focusing your financial goals you are setting yourself up to be frustrated with your progress.
Let’s continue with our hypothetical picture:
You have an extra $100 per month that can go toward your goals. Since you have four goals listed above, you can break your money down evenly and spend $25 on each goal during the month.
Well… yes, you could do that. But how long would an extra $25 take to make a dent in your mortgage? While I am a firm believer in putting every extra penny you make toward your financial goals, and an extra $25 would eventually make a difference in your mortgage, there is a much more effective way to meet these financial goals. The key is financial focus.
What is most important?
Right now, you have to make a choice. Which financial goal is most worth focusing on? You need to be very financially aware to make this decision. Factors that affect which goal you need to focus on can include your age, your current savings account, investments, years until retirement, years until your car literally won’t drive anymore, and others.
For me, paying off student loans is taking priority over other goals. That is not because I think retirement is unimportant; rather, I know that I do not want to enter my 30s with my student loans hanging over my head.
If your car is about to fall apart, and you really, truly need to buy a new one, then make that goal your focus. Of course, consider whether or not you need a car; can you make do as a one-car family? Could you ride your bike to work? Is there public transportation?
Just like Dave Ramsey recommends in his debt snowball method, I recommend starting with reachable goals first. Doing so will help you see progress more quickly, keeping you motivated and on-target. While paying off your mortgage would be an amazing accomplishment, this is a huge goal and is likely to take many years to achieve. Instead, focus on smaller debt, then use the money you were paying on those small debts to attack the bigger debt.
What if I can’t focus?
You might be in a situation where you can’t focus on only one financial goal at a time. Maybe your car was totaled, and you need to buy a new one in order to get to work. You are also only a few years from retirement, and want to pay off your mortgage before you get there.
In that case, doing these two things can help:
1. Be financially smart. Don’t take out a 6-year car loan for a brand new Mercedes. Ask yourself how much car you really need, and what features you can live without. Buying used is an excellent way to save money on the purchase of a new car.
Being financially smart also means that you will make other good financial choices outside of your car purchase. This includes cutting your budget where you need to, and opting out of situations that require spending more money than you should if you want to reach your goals.
2. Make more money. Remaining content with your situation almost never brings about substantial change. If it’s crunch time, make it count. Pick up overtime, write a book, or design a side hustle – anything to make some extra money.
How do you find financial focus? When you have multiple goals to reach, how do you prioritize?