Long Term Goals Seem Too Big, Bring’em in Closer

11 Aug 2018 19:00

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The advantage of being older is the benefit of experience which I occasionally get to impart on others. One area I would like to touch on is primarily for young or new investors is to simplify long term goals.

Over the years I have witnessed many an investor being too aggressive where goals are set so high that they expend massive amounts of energy (or money) and then get burned out and if life throws a couple of curve balls it can bring you down even further making you feel like this little cartoon…


The secret to long term investing is to remember this is a marathon and you have many years to go. The easiest approach is to break-up your long term goals into progressive smaller goals. Take for example retirement, retirement goals are typically a set dollar amount ($1M, $2M, or more) or some percentage of cash flow (% of expenses or % of income) via passive income investing. Those are some pretty intimidating numbers and it is not hard to see how one can feel like they are not making progress.

Because this blog is about dividend growth investing we will take the passive income route where you need to replace 100% of expenses by retirement (say $60,000 a year). To keep motivated, develop smaller incremental goals that fit short term and long term goals. The table below is a simple plan to grow passive income as a percentage of your annual expenses that is segregated into achievable targets by age and still meets our intended long term goal.


In this example, our young investor needs to have the equivalent of 1.5% of expenses in passive income by age 25 (0.75% from their brokerage account & 0.75% from their ROTH IRA) or $900/year. Suddenly $900 becomes a much more achievable than trying to replace $60,000. As the investor progresses, the passive income target doubles every 7 years keeping them focused on the end goal while having pride of achieving the smaller goals in between.

The intent of this approach supports the old saying of “How do you eat an elephant? One bite at a time.” Bringing long term goals closer by breaking them into smaller goals has long been a successful planning approach and is sometimes underappreciated or forgotten. If you are an investor who feels like they struggle from time to time then do yourself a favor and try it out.

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