Set Yourself Up For Life! 5 Long Term Financial Goals For Your First Taste Of Financial Freedom

How do you get rich? Your vague-ish answers to that are probably your long term financial goals, but we’ll work on those later.

Moving forward through this article, I’ll assume that you accept that you need goals… even if you don’t fully understand why.

So why should you care about setting goals?

Because you don’t want to be stuck, which is exactly how I feel when friends keep on forcing me to choose my favorite Spice Girl.  It’s not going to happen because they’re ALL great! Can’t we just leave it at that?

But although I want to be left out of that honestly pointless argument, I don’t necessarily have a plan of what to do after. I just know that I want to be anywhere but stuck.

You’re reading this piece right now, so I’m assuming you’re in the Spice Girl feud of your personal finance. Just wanting to be out of an unsatisfactory situation isn’t enough. You need to know where you’re headed. That’s why you need goals.

If you don’t want to be financially stuck ever again, you need long term financial goals.

Your long term goals would be the big picture stuff. These are the things that would take you a few years to accomplish.

For example, you can’t get ripped overnight. But it’s totally achievable if you put the work into it. It’s also why they’re important in achieving financial independence later on:

1 – They help you strategize. With a specific goal that you can focus on, you’d be able to come up with relevant short term goals that will get you closer to that goal. It will also help identify which of your short term goals you should prioritize.

2 – They will be your compass. You’re guided by a higher power: the desire to wake up at noon every day and still make bank. And this will affect your decision-making. If you’re serious about that picture of what you want your life to be someday, you’ll hold off buying that $500 TV because it will get you farther from the $1 million you need to achieve your life-long dream.

Read about setting short-term financial goals to help you get started!

All your long term goals should also pass this two-fold test:

Requires time and planning. Think of it as a company’s vision but with more clarity. The best gauge of this is if it can be broken down to short term goals.

Hard but attainable. If you’re already earning $20,000 per month, don’t expect a medal for having $100,000 in your savings. All long term financial goals are challenging in one way or another.

So really, what you’d only need a year to accomplish may take others five.

If the goals you have right now passed this two-fold test, then great! But if you’re still feeling lost, here are some that could help get you started:

1 – Retire in X years

Why it’s important: You weren’t born to work your whole life. You deserve to enjoy everything while you still can!

Yup, that’s not a typo. I say X years because everyone’s different. Who knows how much you’re spending and making per month better than you?

I sure hope you know this stuff because if you don’t, you’re screwed.

Assuming that you have some hold of your finances, you’ll appreciate this chart from Marketwatch. If you’re earning $60,000 after taxes and only spending $20,000 every year, you’ll be able to retire in 10 years.

That’s only assuming a 5% return on investments. And those are rookie numbers. Following everything I’m posting here for free, you can get that sweet early retirement even more quickly. 

For example, I have some properties that earn 26% per year. And on average, even general index funds will get you 9%.

The important thing is to start now. You’ll still be counting the years before early retirement, but wouldn’t you rather have the clock start now instead of later?

2 – Find your motivation

Why it’s important: Seek your happiness! Retirement will be boring if you don’t know what to do with your time. You don’t want to get a low-paying job so you’d have an excuse to leave the house.

Pretty weird to see something like this here, huh? But it’s a necessary weird because having excellent personal finance isn’t the goal. It’s just a means to an end.

Unless you just like the thought of having more money like a chunky dog who’d always eat the crappiest treats, you must have a reason why you want to get away from the 9 to 5 hustle. That reason will cost money.

Do you want a change of scenery and move to another country? You’ll need loads of money to make that happen. Although it’s a little easier if the place you’re moving to has a lower cost of living.

Or maybe you’re an ultra introvert whose ultimate life goal is to find the perfect thermostat temperature? Not as costly, but unsustainable if you don’t have enough cash.

The point is, you can’t hold on for years without motivation. It’s pretty hard to say no to a weekend in Vegas until you realize it will set you back by six months to full-time diddling your thermostat for pleasure.

Need more money motivation?
Read about how I got FIRED up for early retirement.

3 – Get rid of all bad debts

Why it’s important: Bad debts will haunt you for the rest of your life. If you don’t want your lenders in the way of your financial independence, you better do something about it.

Depending on how much of it you owe, it can also be a short term goal. You shouldn’t wait years if you only have $1,000 left to pay!

But I’ve seen too many people get so excited about investing that they don’t realize investing a lot instead of paying their lenders back is actually costing them money.

Here’s what I mean: if you’re a newbie investor with not much capital, it’s INSANE to think that you’re going to earn more than 10% a year unless you’re really really lucky. Even if you do, it’s almost impossible that it would surpass the additional you’ll pay in interest.

Let’s say you invested $5,000 and earned 10% after a year. Assuming there are no fees at all (there are), you’d earn $500.

But investing that much meant you didn’t pay your bad debts. You endured late-night phone calls from debt collectors because you just know it’s going to be worth it.

Unfortunately, the rate for those is 15% per year. So after one year that $5,000 became $5,750. You lost $250, and you never even got to enjoy it.

Believe the math because the numbers don’t lie.

And just to be clear, not all debts are bad. Mortgage debt, for example, is good because the rates are low even with the crappiest credit score.

But once the interest rate surpasses the returns on your investments? You know it’s bad. There’s just no way in the world that paying 20% per year on interest is good.

So starting right now, clear the path to financial independence by getting rid of:

3.1 – Credit card debt

The median interest rate on credit cards is 19.49%. This means that as much as 50% of all credit cards in circulation even have a higher rate.

You don’t want that kind of stress in your life! That’s what badly cropped photos are for. Especially not older people who should be spending their retirement years telling their friends to add them on “The Facebook”.

And I’m not kidding about the stress part. Credit card debts are not considered a wealth-builder, so it’s a particular stressor for them. A Congressional Research Service report showed that the average elderly person holds $2,400 in credit card debt as of 2016 – 50% more than the younger debtor.

So assuming the average interest rate and debt, it goes up to $2,867.76 after one year. What’s paid in interest goes higher the longer it’s not paid.

The same report said that It’s the most common debt for the elderly population. But even if you’re far from the usual retirement age and promise to do right by credit card companies, don’t consider yourself safe from bad debts right away.

3.2 – Student loans

If you’re one of the 14% of adults who is carrying student loan debt, is it safe to assume that you owe $37,000? That’s what the latest statistics say the average is.

Although the rates here aren’t nearly as bad as with a credit card, it can still eat up a lot of your current income. And this will prevent you from saving or investing on anything ASAP.

The average loan payment isn’t too bad also, ranging from $286 to $393. So if your budget allows it, go for more than the minimum required.

I have an easy-to-follow guide about refinancing your student loans and getting a better rate in just 15 minutes!

Letting go of more of your money will be painful. As painful as getting dumped by your college partner and listening to sappy love songs while drowning your sorrows with ice cream. (100% NOT from personal experience)

But this only means you’ll recover from it sooner. You can also get rid of it faster by refinancing your student loan for a better rate. You’d even get a $500 bonus that you can use towards your repayment.

And if you have other loans where you’d pay a higher rate than mortgage debt, get rid of those too. A nice sports car is great for social media and more speeding tickets, but not for achieving your long term financial goals.

4 – Improve your credit score to excellent

Why it’s important: You’ll be relying mostly on passive income for the rest of your life, and that may entail taking out a loan. It’s so much cheaper if your credit score is great!

Get it to at least 800. Some sources say that 760 is considered excellent already, but it’s better to err on the same side.

Your credit score is just the numerical version of how responsible they think you are with handling your debts. Here’s how you can improve your score based on the five factors that affect it:

Payment History (35%)

Do you pay your bills on time? That’s just what this means. So yes, it also applies to your non-debt accounts like phone bills. To keep your score up, you can:

  • Pay everything on time
  • Negotiate with your creditor if you can’t make the minimum payment.
  • Don’t skip payments even on disputed bills.

Debt-to-Credit Ratio (30%)

Just because the lender said you can borrow $10,000, it doesn’t mean you should. As much as possible, maintain the ratio at 30% maximum.

Length of Credit History (15%)

If you have a kid, open a credit card in his name now. Just don’t ruin their credit if you want them to call you once they’re off to college. But in your case, you can:

  • Get a credit builder loan (No need if you already have a student loan)
  • Become an authorized user on someone else’s card (You don’t need actual access to the card)
  • Get a secured credit card to get lower rates than the unsecured one

Type of Credit (10%)

Creditors prefer a more diverse credit history. A good rule is to have a mix of long term and short term debts.

New Credit Opened (10%)

If you get a lot of loans too quickly, you’re going to spook the creditors. Why do you need that much credit in the first place? So you know, just take it easy.

A high credit score is totally worth it. This loan savings calculator will let you play around with the numbers so you can see how much you’d save at different credit ratings.

For a 15-year fixed loan of $100,000, you save $13,600 if you have a score of 760 to 850. The impact is even greater for credit card debts because their rates are higher!

5 – Buy your first real estate investment

Why it’s important: Real estate investing works! Source: Dude, trust me. I’ve done it for myself.

This means having a downpayment on the property. Assuming you invest $400,000 and 11% yearly returns, you’d make everything back in nine years even if you don’t get additional properties ever again.

But you don’t even need to start with that much. I bought two houses from low-income housing at $41,000 each which already had tenants paying $750/month. That’s 22% of the cost of the house coming in every year!

Although there can be downsides to this, what I love about real estate is it’s very flexible. You can prioritize stability or high-yields depending on your risk appetite.

And if you pick a good neighborhood, the value will appreciate over time – perfect if you want to leave the country for good after a few years.

Just be ready to do your research because not every house is a winner. 

Here are a few Real Estate resources:
How I use Roofstock to research the best neighborhoods to buy into
Long-distance real estate investing – why it’s the way to go

Should you accomplish your long term financial goals one at a time or all at once?

I’m a big fan of hitting two (or even more) birds with one stone. And it won’t be hard either because there will always be overlaps among them.

For example, you can improve your credit score by getting rid of bad debts. And with all your efforts involving your personal finance focused on building wealth, you’d be able to retire sooner.

Long term financial goals are your key to setting yourself up for life.


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