The first time I ever set a financial goal is actually a tad embarrassing upon reflection. I used to dream of being able to buy a red Mitsubishi Eclipse by my sixteenth birthday. This dream started when I was around eight years old, so I had ample time. I used to do odd jobs, like cat-sitting and the classic lemonade stands, and all my money would go into a candy tin I hid in my closet. Long story short, I ended up moving overseas and was in Japan when I hit 16, so the Eclipse didn’t happen. But I did learn a thing or two about realistic goal setting.
Be specific. Painfully specific.
The Eclipse goal seemed specific, but I never tied a number to that goal. I didn’t write at the top of my little ledger something along the lines of Goal: $19,999 by May 2005. I’d learned my lesson by the next time I set a big financial goal.
In 2007, I already knew I wanted to move to New York City after I would graduate college in 2011. For reasons I’m still not entirely sure of myself, I decided that $10,000 would be the perfect nest egg to fund moving to New York City with a safety net.
The new goal: Have $10,000 saved by May 15, 2011 to move to New York City. This gave me an amount, a deadline and a reason. Being this specific makes it easier on a psychological level to save because you know the why and you’re not just saving for the sake of saving.
Break it down into actionable parts
Once I knew I wanted $10,000 by 2011 – I broke it down into actionable parts by deciding how much I’d need to make each year. Saving $2,500 each year feels far more achievable than just boldly stating $10,000.
However, I didn’t have a job my freshman year of college, so recalculated to $3,350 a year over three years. Then I figured out how to get a job that would provide both a little spending money in college and the ability to save.
Create a plan to get there
Because my college was in a small town, job opportunities were limited, so at the end of my freshman year I applied to become a resident assistant. The job paid $6,000 per year. All I had to do was save a little more than half my annual income and I’d hit my goal. That and perform well at my job so I could get re-hired for both my junior and senior years.
Set up barriers against self-sabotage
The RA job paid out in six installments of $1,000, three per semester. Instead of keeping all that money in my checking account (I shamefully had not set up a savings account of my own by 19), I would transfer the money I wanted saved to my dad’s account. He would hold on to the money and always send me some back if I ever requested it, no questions asked. But the fact that I’d still have to shoot him an email to say, “Hey Dad – Can you send me $300 from my savings?” helped curb potential impulse purchases.
Today, I don’t send money to my dad, but I do have a savings account at a separate bank than my checking. This way, when I log into my checking account, it reduces the temptation to skim a little off the top of savings if my funds for the month feel low.
Continue tracking progress
The most important part of the process was to keep checking in on my goal and track progress towards the $10,000 mark. Each month I’d take a look at the notebook where wrote down my savings and kept a grand total. It’s a habit I’ve built on and still use today when I do a monthly net worth update, but now it’s done with a spreadsheet.
I did end up graduating with $10,000 saved and moving to New York City – where I still live today. Now I’m focused on my next big financial goal and deploying all the same strategies to get there.