If you’re reading this, you are probably working toward financial independence. Or maybe you’re already there, then we’d like you to share your knowledge with us! Financial Independence means you can live on your investments for the rest of your life. Basically, you don’t have to work if you don’t want to. This is a long term goal that can take years if not decades to achieve.
Financial independence is a great long term goal, but how do you get there from here? If you’re 26 and have a large student loan debt, then financial independence might seem out of reach. However, time is on your side. It would be a lot more difficult if you’re 50 with a large credit card debt and a big mortgage. The key to achieving a long term goal is to break it down to manageable steps, such as listing your short term goals and defining more intermediate goals that you would meet later down the road. This is call chunking your goals. People are much more likely to accomplish their big goals when there are milestones in the middle.
Short term goals
These goals are much more manageable goals that can be accomplished in a short time. My New Year resolutions are my short term goals that I aim to finish in one year. Accomplishing these short term goals will get you a little bit closer to financial independence every year.
Intermediate goals
These are the major milestones that we need to hit on our way to financial independence. Some of these goals might take years to accomplish, but it shouldn’t take decades to go from one milestone to another. Each time we reach one of these milestones is a time to celebrate and regroup. We can open a bottle of wine, take a little break, and get ready for the next big push.
Today I’d like to share my intermediate goals and I’m also curious about your intermediate goals. I’m sure everyone will have a similar set of goals, although not exactly the same. Here is my list in no particular order.
- Get rid of consumer debt. We have been debt free since 2008 when we paid off our last car loan.
- Make a 6 figure income.
- Become a millionaire.
- Education fund – Save enough money to fund a degree at a 4 year public college
- Pay off the mortgage. At some point, it would be nice to be completely debt free.
- Investment income is more than my income.
- Our kid is no longer dependent on us financially.
- FI ratio = 50%. Our passive income pays for 50% of our annual expense.
Whew, this is a pretty big list of tough goals. I already accomplished a few things on this list and it’s always a great feeling when I cross an item off. Actually, I think we’re in for a bit of a slog at this time. The next one we can probably accomplish is the education fund. It will probably take us 5 more years to do this one.
What are some of your intermediate goals? I want to see what your list looks like.
Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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Those are some solid goals Joe. As for me, I don’t have many long-term financial goals anymore. Everything is short-to-medium term as I prepare for retirement. Here they are:
* Sell the last 2 of my CA rentals, as well as more company stock and reinvest the proceeds.
* Pay off 3 of my small rentals
* Get my RE license (more for furthering my education, not necessarily for job purposes)
* Get my passive income to about 150% of my min requirements
Once I get there, I think I’ll be able to safely FIRE. I sometimes think I should pay my primary residence off too, but when I run the numbers, it never seems like a good idea.
I am looking to obliterate my goals this year. Currently I have a lot of student loan and credit card debt. I’m in the process of selling a collection of websites I own for 6 digits and hope to use the money to get debt free, buy a home and build a brand new business.
Intermediate Goals:
Debt free
Expenses under $2000/month
Expenses under 40% of net income
I should probably also have a couple of goals for milestones on the value of my investments as well as the passive income it provides.
Nice goals. Is becoming millionaire goal pre tax or after tax? It’s what you get to keep that matters after all.
Just whatever shows in the balance. It’s tough to estimate tax at that level.
My short-term goal is to buy a plot back in Zambia and start building some rental properties. My intermediate goal is to have a steady income from the properties and have a company manage them.
My intermediate goal is to get the equivalent of one month of salary per year in dividend (or ca 5% of the portfolio if I don’t have dividend stocks). Then I will head on towards two months of “bonus salary” per year, etc.
When I have succeeded to get twelve bonus salaries per year I will be ready to retire, with a margin too, since my living cost is lower due to the savings I make each month.
My goals for 2015.
Install a solar system to cover 90-95% of my PG&E bill forever, get the 30% tax credit next year.
Add more funds to Lending Club.
Invest in more dividend paying stocks.
Pay off consumer debt. I could take some funds out of my 401K but I’d pay the penalty, so i’m weighing the cost of the tax penalty versus the interest i’d pay on consumer debt.
I just posted my financial goals for 2015 on my blog.
max out 401K
max out HSA
Do a IRA
Save all over $30K that I make.
And retire in 17 months on a pretty large income, about 4x what I need.
Have hit most of these goals already. And they feel fan-tas-tic! Great feeling of accomplishment paying off all school loans. Felt better than graduating! No more mortgage, ahhh, such freedom. Consumer debt, never. The worst kind of loan. And investing in the kid, total financial independence there upon college graduation. She is officially off our payroll! Thanks for writing this post, Joe!
Keep an open mind and perhaps consider the private colleges. Their financial packages can be better than many of the big, state schools. Most times, they are in better financial shape to offer these good tuition packages. Remember that community college credits transfer to most 4 year colleges. Save even more $.
And to you Joe, if you are in a good school district, especially a good high school-check it out-you may want to consider staying through high school, then downsize, move wherever you want to. I see many people doing this.
Here are a few of our intermediate goals:
-Pay off the mortgage (hopefully in two years)
-Save up for and buy our next car
-Buy rental property
-Double the value of our retirement accounts
My intermediate goal is to get to 3M net worth by the time I am 50. I just turned 42 with my current net worth at around 1.5 M. Long term goal is to retire in my late 50s with a target net worth of 8M. It’s a tough target, but with some luck I hope to be there. I work in Silicon Valley and hope to hit the “start up lottery” to help us get there. Also, most of our net worth is tied into our properties: primary homes plus 2 rental condos in SF Bay Area. Plan to add 2 more condos in the next few years which would be our retirement income. We are on the lower side of the 401k/Ira scale (based on financial samurais scale) at 260k. We wish to really beef that up with maximum contribution, but have been having lot of issues. While I am able to make full contribution to 401k, my wife is unable to do so. This is because of some clause by govt which prevents highly paid employees to make full contributions if rest of the employees do not contribute enough. I was shocked to know about this stupid rule… Then there is the 191k restriction on Roth IRA. With all this I am not sure if we will be ever able to catch up to FS bench mark. Just 1 kid so we would gladly pay for college and even down payment for a house, if he turns out to be a good kid.
I’m about a decade ahead of you and met your targets, also courtesy of the relatively high engineer’s wage in silicon valley. I didn’t score on stock options or in a startup though, just 20+ years of plain old salary income with decent bonuses, all at a very high savings rate. I think you’re right to increase the equity portion of your net worth. I was never a big fan of our local real estate because cap rates here aren’t very impressive. That and the crazy strong effect of the perceived quality of the local school district on house prices. Common stocks offer better diversification and have more resilient growth in my opinion.
I guess my intermediate goals are to learn more about industries that I haven’t invested much in, such as finance, REITs, and utilities. Right now all of my investments are pretty high on the risk scale and it’s probably time to move towards more stable names with an eye towards dividend income. Buying a house is also on my list, just not here.
In 2 months, I’ll have been retired 18 years. I like reading your blog. I’ve accomplished most of your list. Let me check them individually.
CONSUMER DEBT – I do use credit, but pay it off before it accrues interest.
6 FIGURE INCOME – Check, even though it’s fairly low 6 figure
MILLIONAIRE – Nope
EDUCATION FUND- Wife and 4 kids all have at least a BA. One is working on her doctorate. She and her husband make over $200,000 yearly. so I let them pay.
MORTGAGE PAID
2 ADULT KIDS STILL AT HOME – I don’t charge them rent, but probably should
Our goals are similar, except I don’t have kids, so no educational loan yet.
My intermediate goal would be to get through this first tax season with the buying of the 4-plex, and remodeling of the 2 rental properties, selling a bunch of stocks to fund it. Receipts are everywhere. Every year, I’d get money back from filing taxes, so every year, I get really excited to do taxes, but this year, I’ve been putting it off. Goal in 2-3 years, maybe get my investment porfolio to $500K, then pay off the principle house. I’ll probably never pay the rental property off, because if I get sued, they can take my rentals, but they can’t take my principle house. And then pay the last of the $50K student loan off.
These are excellent intermediate goals. Our intermediate goals are
-Dividend income cover 50% of our expenses
-Have multiple passive income stream
-Continue with what we’ve been doing for the last 3-4 years
-Continue with our amazing net worth growth rate
You have very solid goals. Hope you achieve all of them eventually.
I realized that You and I share 2 primary goals.
1. Making 6 figure income
2. Become a millionaire (For me before I hit 45 years old)
I wish I could put such thing as paying off mortgage however I haven’t purchased my house yet. Haha
I have two more major goals
1. Writing 100 articles in 2015 in my blog
2. Save 50% of take home pay and invest in dividend stocks
It will be challenging but I will get done!
Cheers,
BeSmartRich
My immediate goal is to make a lot more money!
After three big layoffs in one decade, my career has taken a nosedive and I’m now working at a very low wage job. I’ve felt stuck here for too long (four years and going!) because of some health issues that neccesitated keeping a job with halfway decent healthcare coverage and enough paid sick leave to use that coverage, but I need to get out and into a real job that will pay me enough to live on AND save.
Still, I’ve managed to grow my net worth by meager amounts each year with 401k savings – luckily the employer matches me to 4% plus adds 6% into a profit sharing plan – another reason I’ve stayed a while. I just haven’t made enough to contribute to my IRA accounts these past few years. But I haven’t had debt since I paid my car off twelve years ago. My savings (including the retirement accounts and cash) are today worth $98,000, but I think that’s a little meager for my age (46).
My intermediate goal is to get my fiancé to open up about his debt, which he doesn’t like to talk about because, as far as I can tell, it’s massive. Like really massive. And once he’s opened up about it, we need a plan to get rid of it. He owes more on his house than it’s worth, has credit card debt (I don’t know how much), and his school loan has been in default for another unknown period of time, but long enough to increase the principal to ungodly numbers. All this scares the bejeebers out of me because I hate debt, and I’ve always worked hard and earned little, and don’t know how to begin paying that much off. I just hope he gets some money coming in soon.
It’s funny that our situations are the way they are. He comes from a little money, while I come from a lower middle class background – I think hurting a little when you’re young teaches you about the value of saving while being too comfortable allows a more carefree attitude to develop, eh?
OMG,
Before you marry this guy who sounds as if he is addicted to debt, I’d absolutely get him to list all, and I mean all, of his debts. If this guy has anywhere near the debt that you suspect he has, you may possibly be heading for real trouble. I worked with a man and woman at my former job who married without her telling him how much debt she had.
The man had always been frugal like you and the woman was more like you fiance. After they married, she wanted to use his savings to pay off her debts. Whammm! That marriage lasted about 6 months. Poor Vince took it so hard that he died a couple of years later. The wife ended up embezzling funds and was fired. Not a very happy ending!
You’re right. I would be hesitant to marry someone who is in so much debt. Probably should work on the debt first before getting married.
Our intermediate goal is to continue saving 70%+ of our incomes every year, which will facilitate us reaching our version of FI in 2.5 years. It’s kind of an overly simplified goal, but it works well for us.
By benchmarking everything off of our savings rate, we’re able to structure our lives such that everything we do is in service of our overarching FI goal. We also plan to buy a homestead in the woods sometime in the next two years and, since we’ll likely pay cash for it, our savings rate is again a crucial element.
70%+ is ridiculous! Wow, you are almost there. 2.5 years will go by before you know it. Your homestead sounds like a great challenge too. It should keep you busy for quite a while. Can you get internet? 🙂
Haha, thanks! YES to internet :)! It’s high on our priority list and Mr. Frugalwoods has become something of a rural internet whisperer in our homestead search.
Hello..the goals you listed are very similar to those that my wife and I had at a similar age (and earlier). I am happy to say now that we are in our early 50s we have achieved them. this took much perseverance and self-discipline (particularly too maintain a cost of living well below our means). the rewards are great, so best of luck to maintain your focus. For us now, our main goal is to transistion to a happy post work life.. hopefully this should not be too challenging!
Thanks for your input. Good luck with your transition. It’s all about attitude, right?
Our goal is mainly provide for our son, funding for his education, be debt-free, have financial independence, have a few investments, travel with family maybe once or twice a year.
Pay off our mortgage and become completely debt free.
After that things get hazy. Maybe:
Once the house is “ours”, renovate it to make it work best for us.
Save up for an extended holiday.
I like the renovation goal. My wife would be happy with that if I add it to our list. We need to find a forever home, though.
Our over arching goal is to reach financial independence and retire early. Since that is roughly five years away, I’d say it is an intermediate goal. To accomplish it, we need to build our investment portfolio to roughly $750,000. We will also be paying down our current mortgage enough that we can buy our next house outright. And we are building an education fund for our children. Sounds a bit daunting, but the challenge is part of the game of life.
Those are great goals. Can you do all that in 5 years? The education fund is the tough part for us.
My intermediate goals include:
* Buying and paying off forever home
* Funding future hypothetical kids’ college accounts enough to pay for 4 year private college
* Funding our retirement accounts enough to have $1M in inflation-adjusted assets by retirement
* Passive income is enough to pay property taxes, utilities, and insurance
* Getting my kids into the public education system (i.e. no daycare costs)
4 year private college? Good luck! 🙂
I like your intermediate goals. They are not too far off. It looks like you can accomplish some of them in 4-5 years.
My short term and intermediate goals:
Pay off car using extra payment option
Retire Dec. 2015 with a pension and SS- Mrs
Retire Apr. 2016 with a pension and SS- Mr
Downsize since we are empty nesters
Use our 401k savings after retirement for travel 2x year once from Mrs and once from Mr account
That’s a great plan. It sounds like you’re set with 2 pensions and SS. Congratulation! I think you will have a grand adventure.
If I assume that I can withdraw 4% of my assets every year for the rest of my life (and won’t run out of assets that way), then I already can withdraw 200 euros/month without any problem. This is roughly 1/6th of my expenses.
I’m now working towards being able to withdraw 300 euros/month without any problem. So this is a total amount of assets of (3600 per year times 25) 90,000 euros. I’m not there yet, but I’m getting there… This would cover roughly 25% of my expenses, forever…
Another way of looking at it is seeing which expenses I can already cover. With 200 euros/month I can cover my phone costs plus my travel costs (I travel by public transport) plus my charity spending, forever. I started with the smallest expenses. Next: also being able to cover my health insurance costs…
I like tracking the % too. It keeps you updated of where you are. I usually track 25%, 50%, then 66%… 🙂
It’s nice to see your progress as you slog through those long term goals.