Hitting your Financial Freedom number requires a very obvious step: accumulating the amount of passive income, or nest egg, you know you need to live on. But let’s take money out of the conversation just for this moment. Unless you achieve financial freedom overnight (sell a business, win the lottery, inherit a fortune), there’s a major piece of the puzzle that you need to be playing if you wish to achieve financial freedom: you need to be setting short-term goals.
You probably already know that setting short-term goals is an important way to stay motivated when you're trying to activate a roadmap for change. Having a goal of exercising 5x/week is a short-term goal; it's something you can start tomorrow, and within one week, you can hit your goal. In the process of striving for this goal, you may also implement other helpful behaviors, such as drinking more water throughout the day, going to bed earlier so you can wake up earlier to exercise, thinking about the foods that will make you feel good throughout the day so that you can fuel your next workout.
Setting a short-term goal for exercising doesn't limit your longer-term goals. Long-term, you may have a goal such as completing a 15-mile hiking loop you've dreamed about. Your short-term goal of 5x/weekly exercise may refine into hiking at least three days/week, which would help you prepare for a longer single-day hike in the future.
However, if you're currently hiking zero miles per day, then facing a goal of 15 miles in one day is daunting, and feels less accountable when it's so far in the future. If my 15 mile hiking trip is five months in the future, it's easy to procrastinate the preparation for that hike. If your weekly goal is to hike at least three days, you better get out for a hike today if you didn't do one yesterday- time is running out!
💸 Financial Goal-Setting
Our psychology has everything to do with how we should set goals, and these same rules apply when it comes to setting financial goals. So much of the (common, yet basic) financial lessons we're taught are based on a singular, long-term financial goal: retirement. But, how likely are we to hold ourselves accountable to a goal we're meant to achieve at age 67, when we're in our 40s, let alone our 30s or 20s?
Retirement is an important financial goal, but we're setting ourselves up for failure if we neglect the shorter-term financial goals along the way. I'm thankful for my journey in real estate investing because it gave me a long-term goal (replace my w2 salary with rental cash flow), and forced me to create a roadmap that kept me disciplined and focused on shorter-term goals (save up for the next down payment for one more property; reinvest profit into loan pay-down). Without these shorter-term goals, and the reward I felt each time we hit those goals, I would have struggled to stay focused on the long-term plan. These shorter-term goals also helped shape positive behavior changes when it came to my own spending and decision-making. They forced me to think about my return on investment of various purchases, and honed my delayed gratification muscle. While it was the long-term goal that held a lot of purpose and direction, my short-term financial goals were what drove so many lifestyle changes and made me the investor I am today.
Financial Freedom Tip
If you're setting your eyes on a long-term goal like financial freedom, or retirement, or saving for your kids to go to college, I congratulate you on having this goal, and I encourage you to pair it with other, shorter-term goals, for example:
🏠 Buy one rental property
💰 Invest $7,000 in a Roth IRA
💸 Generate $5,000 in your side hustle
💳 Pay off a high-interest loan
Few humans can stay motivated for decades to hit a major, long-term goal. Give yourself some grace, build your motivation and confidence, and start seeing momentum in your financial freedom by setting short-term financial goals. What is something you can work on in the next year that will move your finances and your life in the direction you want to take?
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