No matter what financial position you can also benefit from setting financial goals or savings targets. For those in a more perilous financial position this can help get you back on track and thriving financially. This is what I used to go from a financial basket case to someone now on the path to financial independence.
During my previous poor financial situation (which wasn’t great) I was determined to get out of my predicament sooner rather than later and began setting both financial goals (more longer term) and savings targets (more shorter to medium term).
I also created financial achievement levels which I used to help spur me first to getting back square, then to gradually improve my financial position on the path to financial independence (again this is what I used and it worked for me).
For a bit of a background, I set this up a few years ago when my financial situation was poor (to put it mildly). I had a negative bank balance, was behind in my bills repayment cycle, had significant debt levels (over $500K) and less than $10K in assets.
My thinking was that whatever I was doing previously clearly wasn’t working and I began to analyze every part of my life to start my road to financial recovery. I then planned out where I wanted to be financially and my aim was to figure out how to get my end financial goal.
Among the things I did:
I completed a full financial audit to get my starting point.
I went through my current spending and completed a very strict budget (initially to get back on track) then a more generous
I set up an automated personal financial system where all my income was deposited into a central account of which nearly all bills/debits come out from and any savings were then transferred to a dedicated savings/investment account.
After the above points I then:
Educated myself on what I could about finances, building wealth, investments and businesses (both online and bricks/mortar).
Focused on building income either by looking for short term gains such as a pay rise, 2nd job and selling unwanted/unused items and then building or investing in income producing investments such as online businesses, bricks and mortar businesses, shares, real estate, etc.
Finally, I let the past go (and all the mistakes I made) and focused on my future. I set up a daily and weekly routine, checked in every fortnight on my savings and financial goals to see if I was on track and worked at these goals one day at a time.
Eventually these days accumulated and like a heavy boulder moving downhill, slowly picking up steam my financial situation improved, gradually at first then more suddenly as my income and investments began to grow and my debt levels began to shrink.
Remember this is a guide and I’ve listed where I’m currently at with my achievements. For most of you (should you follow these) you’ll blow right past my achievements and if there are some of you that take longer to achieve what they set out to, that’s alright. Stick with it and do your best. It’s not a competition against others, compete against yourself.
The financial levels of achievement were (as well as mini goals within each level):
Level 1 (Getting back on track)
1. Get back to the $0 cash position and back on track with the bill repayment cycle.
2. Save $500
3. Save $1,000
Status: Complete. This took a couple of months then I moved onto Level 2.
Level 2 (Slowly improve cash position, build cash for investing, chip away at debt)
1. Save $10K cash
2. Saving towards downpayment on first bricks and mortar business
3. Save towards buying an online domain costs to build a website including content
Status: Complete. This level took me several months to achieve however I also started my research into buying a bricks and mortar business as well as building an affiliate website.
Level 3 (Emergency fund at 3 months of expenses, finalized investment strategy, build first website, buy first bricks and mortar business)
1. Reach $15,000 as 3 months expenses for my emergency fund (significant expenses due to debt repayments!)
2. Earn my first dollar of income from affiliate website
3. Purchase my first bricks and mortar business
Status: The $15,000 only took an additional couple of months, earning my first online dollar of online income and purchasing my first bricks and mortar business took time. I was a bit of a slow learner so the online income took 6 months while it took me 12 months to purchase my first business, which is a laundromat (I could have purchased a business way earlier however none of the ones I saw for sale matched all my filters including having the majority of the business financed by the vendor).
Level 4 (Emergency fund at 12 months, earning online income, own a b/m business)
1. Reach $50,000 as 12 months expenses for my emergency fund (down from the $60K annualized 3 month amount as debt was repaid)
2. Build or buy a 2nd online website
3. Purchase a 2nd bricks and mortar business
4. Start stock market/managed fund investment with regular investing
Status: Current level. Now that I had reached my 1st emergency fund target ($15,000), I am now targeting my 2nd emergency fund target of 12 months of expenses. I was confident enough with new financial habits and how my financial system & budget was working and growing that I could now allocate some money towards a share investment and to add money to this on a regular basis (ie dollar cost averaging) and I started this as soon as the first emergency fund target was achieved.
The 2nd bricks and mortar business is still being researched (no available businesses have hit my filter and I haven’t canvased my city to knock on any businesses doors myself) however I have set up a 2nd website that is slowly bringing in some additional income.
Level 5 (Become a homeowner)
1. Purchase my home to live in
Status: To be achieved
Level 6 (Become a multiple property owner)
1. Purchase my first investment property
Status: To be achieved
Level 7 (Personal debt free)
1. Repay all my personal debt owed (both house and initial debt) though likely having investment debt
Status: To be achieved
Level 8 (Financial independence)
Own my own property
At least 12 months of lifestyle expenses for emergency funds
Have significant listed share, property and bricks & mortar business investments generating more than enough income to fund all my lifestyle expenses (including a generous buffer), i.e at least $150,000 income per annum.
Completely debt free
Status: To be achieved
1. Don’t try and force things. In my case I was frustrated, in my 40’s and significantly behind friends, peers and relatives. To say I was frustrated is putting it mildly. Unfortunately I had no one to blame but myself and eventually used this frustration as fuel to drive me to financial success. Trust the process and if you have put in the initial work re personal audit and putting a plan in place to not only stick to a budget and save but to grow your income you will get there. It will take time though.
2. Whilst I haven’t achieved all of the levels on this list (yet) I am confident I will get there. As I mentioned above, trust the process and believe in yourself.
3. Don’t go easy on yourself at the start. Pull the band-aid off and go deep on your initial audit of your financial situation. Make a promise to yourself that this will be the worst it will ever be and once you’ve done the initial hard work and stick to the plan it will get better.
4. Enjoy life and let it take you where it takes you. Whilst it’s great to have a plan, plans change and you will need to be fluid. Opportunities will come up that you may not have expected. You will meet people who will change your life and direction. Follow your gut instinct, keep believing in yourself and enjoy life and your journey!