Today money and finances for all of us are issues not only of well-being, but of physical survival as such. We all know that this is important, but not everyone understands how to set financial goals correctly, and how to treat money in general. If you doubt if it is worth setting annual financial goals, we have several personal reasons that will convince you of the importance of this.
“Money is freedom made of gold.”
Erich Maria Remarque
Each of us at least once in a lifetime has come across an annoying voice in his head: “I need more money!” Why is this happening? Why did it arise?!
“I want a happy life with a beautiful woman. But my personal life does not go well, because girls need wealthy men who can put their children on their feet! - I want a new car! - I want a new dress from Chloe! - I want a beautiful hairstyle, a visit to a beauty salon and that bag! - How beautifully they live, I also want a house with a swimming pool! - I just want to have a good meal! - I want the last iPhone! - I want to celebrate the next New Year in fabulous Bali! - I want to go to Dubai and climb the Burj Khalifa! - I want to live in Germany and be able to do whatever I want there! – I want… I want… I want…”
Great! Now we understand that we have “Wishlist” (goals) and we need to satisfy them, and for this we need money. Indeed, many of our wishes and goals, which can be converted into money, can be surely attributed to the category of expenses. And if it is measurable in money, then it can be divided into smaller pieces, therefore it is realistic and achievable! To control and focus on your wishes and goals, we recommend using our tool, the description is here.
“If money can fix a problem, then it really isn’t a problem.”
Harvey Mackay
Strangely enough, but it’s here that many people give up and turn to a huge chain of acquired life fears and misconceptions. Thanks to our parents, upbringing and environment. Realizing that all this is not yours, but acquired, you immediately enter the next level of people named “I can!” Having realized that we can, it's time to move on. The next step is Planning.
Let’s calculate our financial minimum and optimum
All we need for the next step is a few hours, a notebook, a pen and some patience. Online banking or any other system where you can follow your expenses by categories can also be useful. It’s okay if you don’t have any, for the first time your desires and memory will be enough.
Let’s make a small table where we enter all our monthly expenses that we regularly make and without which it is difficult for us to imagine our normal life today. As an example, we took the calculation for an office clerk living in a big city in a rented apartment.
| Regular expenses per month | Total, USD |
|---|---|
| Food (at home and at work) | 600 |
| Household (rent, taxes, housing and utilities) | 1400 |
| Sports/Gym | 70 |
| Medical/Health | 500 |
| Transport (car, taxi, underground) | 250 |
| Clothing | 150 |
| Telephone, Internet | 140 |
| Beauty/Barber | 50 |
| Education (books, courses) | 250 |
| Dining out (4 times a month) | 250 |
| Entertainment | 150 |
| TOTAL: | 3760 |
Great! Now we have an understanding of our minimum needs. Knowing this, we can move further to optimal incomes to satisfy our deeper needs and goals.
Stop! But what if my regular expenses are already bigger than my monthly income?! There are two possible answers:
- you obviously live beyond your means, and you should review your spending (to do so it will be useful for you to find out what the breakeven point is);
- you get a really modest salary, and you need to make a realistic assessment of your professional competencies and to get more by offering something in return or changing job, taking a part-time job, starting your own business, working for yourself as an individual entrepreneur.
| Additional discretionary expenses per month | Total, USD |
|---|---|
| Massage and sauna | 150 |
| Travelling/Vacations (2 times per year – 4800 USD total) | 400 |
| New phone (900 USD) | 75 |
| Personal coach | 70 |
| TOTAL: | 695 |
Now we have a list of our optimal expenses, which we converted into monthly income. Indeed, the amount of 400 USD looks much more real than 4800 USD as one piece for two trips a year!
Our brain is beginning to believe that it is real and quite achievable. All this is quite modest, but what about something bigger?! We didn’t forget about it as well. If your goal is big, we recommend focus - plan one goal for this year and the other one for next year.
| Financial goal for the year | Total, USD |
|---|---|
| New car KIA Rio (15600 USD) | 1300 |
| TOTAL: | 1300 |
At this stage, the planning is completed and we can begin to carry out our plan.
Let’s act and achieve financial goals
Now let's make more calculations. Regular expenses and additional discretionary monthly expenses give us the total amount of the minimum monthly income. If we add financial goals, we’ll get the optimal monthly income.
- Minimum monthly income – 4455 USD
- Optimal monthly income - 5755 USD
So, we now have two amounts that we got empirically by simply transforming our desires and needs into a measurable amount of money and decomposing it into 12 parts - 12 months a year. It would seem: - “Voila!” You just need to find a job with a certain salary per month and that's it! In the bag! But it’s not that simple. What is wrong?
Rule No. 1 “Finance is measured only by annual income.” This is important so that at least your own brain were not afraid of your goals and believed that they are achievable, because “60000 USD” a year is much more pleasant than “4500 USD per month.” Think of yourself and your self-esteem. The realization that you are worth something will not come by itself, only a person himself can raise his self-esteem. Inside out! A simple trick with a calculation of annual income will already fill your world with colors.
So, our numbers now look like this:
- Minimum income – 53460 USD
- Optimum income - 69060 USD
Rule No. 2 “Focus on your goals.” Regularly sum it up and keep track of your finances. Write down one number with the ‘Optimal income’ on a cardboard and have it with you in your wallet by the credit cards, as a reminder of what you need, and this “amulet” will save you from more than one unnecessary purchase). You can also use our tool, which is specifically designed for this purpose. Enter your financial goal as one of your Annual goals, add a beautiful picture with a lot of money there, write “My goal is 69060 USD” in the heading, write why you need this amount in the description, and what will you get as a small prize after you achieve it (a dress , a pair of shoes, a pen or a lighter - any fetish that will become a reminder of your own “I CAN!”).
Why do you need to set yourself one general financial goal, and not boundaries!? The answer is simple. It is not a frame in the aquarium, but just a milestone that you just need to pass, because in fact there is still a lot, a lot of room for growth beyond it. As a matter of fact, there is no maximum in the money issue, we are only limited by our abilities, knowledge, skills and somewhere else we suffer from external environmental factors. There is also a way out of this, because there are thousands of stories about people from slums confirming this, but now it’s not about that.
Rule No. 3 “Money loves speed.” An expression, so popular in the West has already become a category of folk wisdom, which, to our great regret, not everyone understands:
“Money loves speed!”
Folk wisdom
If you came up with some good idea, do it immediately. If you set an important task at work - do it immediately. Do and forget. The faster you learn, the faster you prepare a business proposal, the faster you fulfill your regular duties and take on some extra tasks, the more money you get in the end.
Fast and energetic people can grow 2, 3, 5 times each year. There are unique individuals who live at even greater financial speeds. We all are able to jumping above our heads 1.2–1.3 times a year easily in terms of money. Be realistic, set achievable financial goals, then in the long run you will gain much more than just demotivation at the end of the year if you do not fulfill your obviously inadequate goals.
Conclusions
This exercise is of great practical value and has real applied value. We know for sure what we need, how much we need, and we understand what we can do to achieve it. We are no longer afraid of numbers and our goals, we have a financial plan and goals for next year.
What else have we forgotten? The answer lies in one global axiom:
All the rules and laws that work for organizations work for personal use as well!
A personality is an organization with organs instead of departments, a family is a small organization of a couple of people, a plant is a large organization of hundreds, thousands of people. The country…. Society ... The population of the Planet ... We are all members of organizations and tribes, so global laws work just the same for us.
Look at the concepts of GDP, GNP for yourself and you will understand what we are getting at. We will not focus attention on this now, you can find many explanations on these issues on the Internet. We all were taught the basics of economics at school. Many of us, like the author of this article, successfully passed by this subject, but had to return to it in due time.
Taking into consideration only wages and real money, we forget about the amount of goods and services that we get for free. We don’t appreciate it, we don’t consider it our value. Housewife work, spouse’s pies, upbringing of children by my grandmother, advice and help of our friends and colleagues, psychotherapeutic help of friends during hard times — all these are huge profits that we make by investing something of our own (time, care, love, patience). The quality of our investments determines the amount of benefits we receive, and therefore our value.
There is no need to recount it, but the main point is that you have this value too! Keep it constantly in mind. Be grateful to your environment, and you will become richer and richer every day!
“If your only goal is to become rich, you will never achieve it.”
John Rockefeller
Summing up at the end of the year, do not forget about how much you received in non-monetary aspects. Even if this year you did not fulfill your goals, you became richer and wiser for future achievements! And with 100% confidence, after doing this simple exercise, you will receive more income than last year.
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Today money and finances for all of us are issues not only of well-being, but of physical survival as such. We all know that this is important, but not everyone understands how to set financial goals correctly, and how to treat money in general. If you doubt if it is worth setting annual financial goals, we have several personal reasons that will convince you of the importance of this.
