The previous challenge might trigger you to think about your long-term career or financial goals. By long-term, I mean in the next five years or longer, versus shorter-term goals that can be achieved in the next year or so. Your income empowers you to move toward both types of goals, but there’s a big difference between saving $50 per paycheck to put toward a vacation and doing so for a down payment on a house. For instance, a recent short-term goal involved saving for the hospital bill related to the birth of our second child. We knew how much we’d need to save and when we’d need the money. At the same time, I have a long-term financial goal to pay off my student loans.
Every time you look at your paycheck, think about what you’re trying to do and how you can make smart fiscal decisions to succeed. Do you want to contribute more toward your retirement so you can retire early? Receive different benefits for more coverage or less money taken out per month? Would you like to work toward a higher salary, explore a promotion, or put your hat in the ring for a higher-paying job elsewhere? Start a side hustle for a secondary income stream? Make six figures upon reaching a particular age? When you know the structure of your pay in full, it positions you to take more steps toward financial independence.
TRY THIS
Have you heard of S.M.A.R.T. goals? This strategy emphasizes particular characteristics of goal-setting for better results; the best goals are supposedly specific, measurable, achievable, realistic, and time-bound. Let’s say you’d love to vacation more frequently. For your best chance at reaching that goal, it needs to be specific (vacation where?), measurable (how much will it cost?), achievable (what might you do to budget accordingly?), realistic (what sorts of milestones do you need to keep your savings on track?), and time-bound (how soon do you want to go on that first vacation?). After you take a look at your paycheck, set a financial goal for ten years down the road, and make it S.M.A.R.T.