Create Goals Throughout Your Lifetime

23 Jan 2016 01:21

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At work I had young co-worker ask for some advice on what I thought would be the best approach to start saving and investing. Considering my co-worker is just starting out in his professional career it reminded me how confusing starting life can be especially in regards to saving and investing.

This is where I hate the media in over-hyping retirement savings and emergency savings. While the media’s intentions are good, the constant bombardment of the same stories makes a young saver lose sight that they need multiple goals to meet challenges during their lifetime.

Additionally, these media stories throw out some huge numbers like 2 million dollars or 6 months of salary. If you are 25 that is impossible to perceive! Those goals are so large or so far out in the future it could make you save too much for the wrong goal at the wrong time or cause investing paralysis where you are too confused to do anything. The better approach is to have multiple goals over time that are achievable.

Getting back my co-worker, I started the advice with: In order to save and invest you need a set goals so you can budget & plan how to save. Unfortunately I followed that up with questions like do you plan on getting married, buy a house or have kids. It wasn’t till later that I realized this was not fair to ask and expect an answer. I just asked him to decide on some big time life changing moments at the start of his career which was not cool (If you are reading this I apologize). Instead I will offer up a set of goals I would shoot for if I was 25 again.

Age 25

Goal #1 - Emergency savings equal to 1 month of expenses
I realize experts claim you should have 3 to 6 months of your salary in cash in case of emergencies but I believe this is the worst advice for young workers. Instead I recommend enough cash for 1 month of expenses. If an emergency pops up there are things that will help and not require you to burn through cash; there is short/long term disability, severance pay, and unemployment. If you still require cash do not forget your 401K but make this your last resort.

The only exception to this goal would be for people with huge income swings. Think of careers that are seasonal or highly dependent on commissions. This is the only time I endorse a 3 to 6 month stash of cash to help even out the uneven earnings.

Goal #2 – Contribute enough to your 401K to get the max company match (but not a penny more)
This is an easy one. If your company offers a contribution match be sure to contribute enough to get the maximum match. The match is free money so do not walk away from that! But there is no need to contribute more than this. You have other things to save for and additional 401K contributions at such a young age will take away from other goals.

Goal #3 – Open a taxable brokerage account and start a DGI portfolio
Take your first step towards financial independence

Age 30-35

Goal - Savings for future life changes
Simply put, life and priorities change with age. This savings can be used for those big life changes like buying a house or changing careers. This amount can vary but anywhere between $10,000-20,000 is a good start.

Age 45-48

Goal – Start an IRA or ROTH IRA
For the first 20 years of your career I recommended savings into taxable accounts. At this age you have to start being strategic for the second half of your career in regards to taxes for future savings and income.

Age 50

Goal #1 – 50 at 50, Annual Dividend Income equal to 50% of annual expenses
I love the 50@50 goal, this level of passive income provides so much freedom. It can act as a source of emergency funds, you could use it towards college tuition or simply reinvest for retirement. I really believe this is an important goal because losing your job in your 50s is the worst time as you have so many financial commitments and approaching retirement. Finding another job becomes extremely difficult and even if you do find a new job there is a good chance it pays much less than the one you lost. Having a passive income stream can make up for this loss.

Goal #2 – Max out 401Ks and/or IRAs every year until retirement
Up to this point you have been primarily saving in taxable accounts. This is the age to completely change your savings habits. You probably split savings up with 20% towards tax deferred and 80% taxable. Now you want to completely flip this around with 80% or more of savings going towards tax deferred accounts.


Goal – Annual Dividend Income equal to 100% of annual expenses
Not too much to explain on this one as it is a typical retirement goal but I will add if you met the 50@50 goal this should be easily achievable when you factor in dividend growth and social security.


I am sure there are financial planners screaming after reading this or you may not agree. Trust me I would not be insulted. The life lesson I have learned is that if you set goals at specific ages it makes long term goals like retirement easier to achieve while still managing financial risks that will arise during your 40+ year career. You can use any saving/investing goals you choose, the take away is to plan it out in chunks so it is manageable.

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