Yogi Berra allegedly said ‘if you don’t know where you’re going, you might end up somewhere else.’ Typical of his sayings, it’s almost too true to be humorous. The advice is also especially relevant to personal finance. We’re given lots of advice with little thought as to what we’re wanting to accomplish. True, a lot of the standard advice gets us off in a good direction. But to really accomplish a dream, it is important to define it.
Often Our Dreams are Vague
Often our dreams are fairly vague. A lot of people say that they want to ‘travel a lot’ in retirement. Does this mean three trips a year? Or 5? Or living out of an RV? And is it mostly domestic travel? Or international? Tenting? or hotels? ‘Traveling a lot in retirement’ can come with a huge range of price tags, which determines how much you need to save for retirement.
Or perhaps your dream is to start a business. Again, this alone is a pretty vague dream. Is your business going to be a full-time job, a side hustle, or a retirement gig? Is your business going to cost $300 to start, or $300,000?
The point is, when you don’t define your dream, you don’t really know how to save towards your dream or how to strategically save your money to be accessible when you need to access it. Furthermore, if you don’t define your dream, in all likelihood, it will always remain a dream. If your dream always remains vague, it will always seem out of reach and you’ll never take actionable steps to turn it into a reality.
How to Define Your Dream
Defining your dream is very similar (and may overlap) with setting goals. A common acronym is ‘SMART.’ SMART goals are Specific, Measurable, Attainable, Realistic, and Time-bound. Know where you’re going, roughly when you want to get there, and hold yourself accountable. Arguably, any goal is realistic as long as you’re willing to work hard enough for it (just ask Elon Musk). But know how hard you’re willing to work for it.
Write your dreams down. Be specific enough that your dream becomes more than a vapor. Yet, be flexible enough to allow for life’s surprises. Hold yourself accountable, and perhaps ask others to do likewise.
Create an Action Plan
Once you know where you want to go, you can start mapping out how you’re going to get there. Determine how much you need to save each year to reach your dream, and start saving. You may need to cut expenses or pick up a side hustle to start doing so.
Of course, as life happens, your map may change. And you may need to adjust your dream. You may even never reach your dream. But you’re giving yourself the best shot at achieving your dream.
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- While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.