Setting Financial Goals

As the year wraps up and the new one approaches, it is common to see everyone setting their annual goals. While there are always some goals that each one of us wants to achieve – for e.g., financial goals may include earn more, save more, invest and grow nest egg more etc, I want to take this time to reflect on some things to keep in mind when setting financial goals.

Goal setting can be a great way to achieve success in life. Of course there are exceptions to the rule – and depends on each individual’s commitment, personality, ability and other uncontrollable circumstances. But something that is highlighted a lot in media is to set SMART goals. SMART is a mnemonic acronym standing for Specific, Measurable, Attainable, Realistic, and Time-related. A lot has been written about SMART goals and I will not try to repeat things here – but I encourage you to read up and think about this as a goal setting measure.

Setting Financial Goals

An important aspect of goal setting is not to set overarching goals that are unrealistic and unachievable in the time-frame. For e.g., if you are not able max out your retirement account, dont set a goal to try and max out your account in the new year (unless something drastic changes in your financial situation). A more realistic goal may be to attain say a 5-10% higher contribution amount in the new year while slowly working your way towards reaching the end goal – which could come 2, 3, or 4 years from now.

This blog is a focus on achieving financial independence and at the basic level – its a simple concept: Spend less than you earn and invest for the long haul. How each one of us does this is up to our personal choices. Some may choose to go the frugality route – to cut down on the expenses. Some choose to simply focus on looking to grow income by going the side-hustle route. Either method will work fine, as long as you spend less than you earn and invest. Simply treat yourself as a corporate entity.

Treat Yourself as a Corporation

At the heart of matter, what are investors looking for in companies? A company that is growing perpetually and sharing those increasing profits with the investors.

  • Revenue Growth: A company that sees revenue growth is doing better and increasing market share. We can choose to increase our revenue by: asking for a raise; picking up extra work if available; start or increase side hustles etc.
  • Expenses: Controlling expenses is key to any business/individual. Control expenses by cutting down on discretionary spending, tweak finances to reduce taxes, keep a check on lifestyle inflation. This is one of the main keys on the path to financial independence.
  • Capital Expenditure (Capex): Invest for the future to achieve better revenue/earnings. This can take various forms – investing to grow the nest egg, taking courses & spending time to learn, looking for small incremental improvements on a regular basis.
  • Debt: Debt can be a great tool to fuel growth. Companies always need access to credit markets to grow their business and the same goes for individuals. There is a time for taking on more debt and there is a time to cut down on debt. Always pay down high interest debt and use debt only on appreciating assets.
  • Earnings Growth: Earnings are the underlying profits. These are the leftover profits after expenses, capex, taxes, debt repayments etc. The goal is to grow this steadily on a regular basis.
  • Reward: Companies reward shareholders via dividends and/or share buybacks. Be sure to enjoy the fruits of the hard work 🙂
  • Review Regularly: Companies review on a quarterly basis and share outlook. Same should go for individuals – review where things stand on a regular (monthly? quarterly? semi-annually?) basis and tweak things accordingly. Setting a goal at the beginning of the year does not mean its set in stone – circumstances change all the time; tweak to change it a bit anytime as long as steady progress is achieved.

Have you set your goals yet? I am working on finalizing my blog post on the goals for 2016 and will be sharing the details soon. What are your thoughts on the points made here in this post? Be sure to send your feedback using the comments section below.

 Photo Credit: University of Pittsburgh

15 thoughts on “Setting Financial Goals

  1. I love the idea of treating yourself/family/finances as a corporation. It’s a great way to break your goals and objectives into different categories and working on incremental improvements each year. This helps avoid, as you say, creating unattainable goals.


    • Thanks for stopping by and the comment, Josh. Setting realistic and achievable goals is a big part of making steady progress and treating yourself as a corporation is a good way to look at things.

      Your blog is new to me. I’ll stop by and check out your blog.

  2. We haven’t set our 2016 goals yet R2R. In the past I have struggled with setting goals that were too vague to readily measure. Financially 2016 will be an interesting year for us, because I will either semi-retire….or more likely start the new business I’ve been kicking around. On top of that we have a nearly 3 month trip planned. My financial goal would probably start somewhere around…..ENJOY the activities I’ve listed above…..and find my net worth and passive income higher in a year than they are today!

    Merry Christmas to your family and Lil’ R2R buddy.

    • Thanks for the wishes, Bryan. Merry Christmas to you and your family as well.
      Thats pretty amazing – that you are planning a semi-retirement next year. Or starting a new business – both those options sound so exciting – Im sure you will do great and have a great time in 2016. Ending up with a net worth more than it is now would be a nice goal 🙂

      Best wishes

  3. R2R,

    I thought corporations were considered people (okay, really bad political/tax code joke here). You hit the nail on the head with both of your points here. There is no point in setting a goal just for the sake of setting it. In my head, the image of somebody running and chasing a carrot stuck to their head keeps popping in to my mind, because in the cartoons the carrot was always too far out of reach and it could never be grabbed. You need to set attainable goals that require you to push yourself but are realistic so you keep on pushing through the end of the year. Ideally, each goal should be a photo finish and you should be biting your finger nails as New Years approaches.

    Thanks for sharing these and they were definitely on my mind when I set my goals earlier in the week. I’m looking forward to seeing what you draw up for your 2016. Have a great holiday!


    • Hah…if corporations are people, then people should be corporates and should be allowed to tax invert 😉
      Yup…every single year, we tend to set extremely lofty goals and give up a couple of months after. All goals should be realistic and achievable – theres no point in setting a goal that cannot be achieved in one year. My goals so far have been a bit too easy, so I think I should go the other way and aim higher.

      Thanks for stopping by and sharing your thoughts. Wishing you and your family a fantastic Christmas. Looking forward to share this amazing journey to financial independence with you next year.


  4. We haven’t set our new goals yet but will likely do that sometime before the end of the year. We’ll likely look to see how we did this year and then look to see where we can improve even more. I’ve heard from some experts that by concentrating on what you do best to make it even better provides you with more momentum than trying to improve what you don’t do well. I’ve used that mentality in several aspects of my life and I can personally say it seems to hold true with my progress. 🙂

    Cheers to a prosperous 2016 with many more goals accomplished! AFFJ

  5. Interesting way of thinking, looking at one’s self as a corporation. Sometimes you’ve just got to reduce it all to numbers.

    ARB–Angry Retail Banker

    • Hi ARB,
      Thats right…corporations exist only to make money – so when it comes to money, treating ourselves as corporations is a way of trying to achieve that financial freedom we all crave.

      Happy Holidays

  6. R2R

    I have goals in my mind but didn’t put them in my blog, I will do so soon. This year wasn’t that much good in the financial side, Hope that next year will bring more good numbers.

    Happy Holidays

    Sharon – Divorcedff

    • I just saw your update on the goals, Sharon. You are making steady progress in the right direction – which is the important thing. Aim high and work towards it and Im sure you will get there.

      Happy Holidays to you too

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