Goals and Objectives on Your Journey to Financial Freedom
Charles retired in his mid 50s in May 2016 from a career in Canadian banking. He relies exclusively on income from rental properties and a dividend income stream from a portfolio he amassed over several years.
Before I delve into the subject matter of Financial Freedom I think it is only fair that I share a bit about myself so you have some context as to where I am coming from. Hopefully you will be able to relate to my story and one or two of you might even say ‘Holy jumpin’, that guy was just like me when he was in his teens and early 20s!’
During my teens I didn’t really enjoy school that much. I did ‘okay’ in high school but I never really applied myself. I had no idea what I wanted to do but it was always expected that I would go to university; I was never, and still am not, very handy at fixing things so going into the trades was totally out of the question.
My parents and I never really discussed what I would actually DO after I completed university. I strongly suspect they were hoping and praying that I would, one day, grow up and start a career.
In the province where I was raised, kids would finish high school and would then complete two years of CEGEP before they could enter university. I don’t think my parents wanted me to live at home for another couple of years so they sent me to a boarding school for grade 12. Once grade 12 was completed it was off to university. The thing is, because I did not complete 2 years of CEGEP, I HAD to attend university in another province.
So…off to university I went.
By going to boarding school I lopped off one year before going off to university. This meant I was entering university when I was 17 while most other first year students were 19.
My years at university were amazing but not necessarily from an academic standpoint. In fact, during my first year at university my roommate and I perhaps did a grand total of 24 hours of studying outside the classroom of which I probably did about 22 hours.
Another friend of mine in residence was in first year of an Engineering program. He just stopped going to classes before the Canadian Thanksgiving holiday (early October) but he still remained in residence. Quite frankly, my friends and I had a great time. I remember the stuff we did like it happened yesterday.
In my second year I started to study a bit more but I still really didn’t apply myself academically. My thought process was more along the line of university being a place where you are supposed to gain some life long memories and friends. That I did!
In my third and final year of my undergraduate program I finally found the library. Who knew? The university had a library!?
Surprisingly, I graduated. Great. Now what?
Home I went.
I had never discussed with my parents my intentions once I had graduated from university. Quite frankly, I fully intended to lifeguard for another summer after which time I would start looking for employment. Employment in what and where? Didn’t have a clue.
That idea got nixed pretty quickly when shortly after returning home from university my parents asked what I intended to do and where did I intend to live. Whoa! I had recently turned 20. You mean I couldn’t live at home a bit longer?
I won’t go into details since I want to get to the point of this article but suffice it to say I landed a job with a major Canadian financial institution. Miracles do happen!
The position I landed was an entry level management trainee position with one of Canada’s major financial institutions. I lived in Montreal. Where was the job opportunity? Calgary, Alberta! ‘But, Mom/Dad, I don’t know anyone out there!’
‘Doesn’t matter. You’re not living at home.’
Being an avid skier, I got excited when I realized how close Calgary was to the Rockies.
Sure enough, my first winter in Calgary I thought I had died and gone to heaven.
My starting annual salary was $14,000 (no, I am not missing a digit). This was 1980.
My rent was $375/month and my living expenses were negligible.
I made some really close friends fairly quickly who were avid skiers like me. For $400/season I had a ski pass to the ‘Lake Louise, Sunshine, and Norquay’ and we skied at least 50 times from late November to mid June.
I’m telling you…I was living the dream!
My income increased over the 4 year period to ~$25,000 and because of depressed economic conditions in Calgary during 1981 – 1984, my rent kept going down every time I moved; I lived in 7 different places and the last place in which I resided I was paying less than $200/month in rent. I was saving a ton of money relative to my income.
Four fantastic years in Calgary until one day I get a call from my mother inquiring about my plans to return to university to pursue a Masters of Business Administration (MBA). UNGH!? Where did that come from?
I’ll dispense with the details but I ended up moving to Ontario and going back to university.
Culture shock? You’re telling me! That’s an understatement.
Here I was, 24 years old and I no longer had any income. All the money I had saved while working for 4 years had to see me through to the end of my MBA. There was no way I was going to go in debt!
For the first time in my life I had to set goals and objectives! I had never set goals up until that stage of my life. Sure, I had set short term objectives such as ‘Pass this course with at least a 70% final grade’ but I had never set Goals. In fact my objectives were not truly objectives. They were more like ‘prayers’….’Dear God, please let me pass this course with at least a 70% final grade.’
Nobody had ever taught me the difference between the Goals and Objectives or how to set them. You have to remember that when I was in my teens we didn’t have the internet where I could easily research the difference between the two.
Over the course of time I finally learned the difference between the two. Now, when I read what various bloggers write regarding their financial goals and objectives I think to myself….that was me!
I know people use the terms goals and objectives interchangeably but they really are two different things and you need to understand the difference between the two.
I don’t want to come across as a ‘know it all’ but had I never learned the difference between the two I don’t think my wife and I would have achieved financial freedom several years ago.
Given that you are reading this blog I strongly suspect you have some deep desire to improve your financial lot in life. If you didn’t, you would probably be reading or watching something mind numbing.
So here goes…
- Reduce average monthly expenses to less than $X/month
- Average X% after-tax savings which can be directed toward investment
- Receive $X in dividends for the year
- Increase my invested assets my $X
are NOT Goals.
Goals and objectives are two related, yet separate, concepts. Goals without objectives can never be achieved and objectives without goals will never get you to where you desire.
In my opinion, the difference between goals and objectives is that a goal is a description of a destination. An objective, however, is a measure of the progress that is needed to get to the goal (destination).
Goals are essentially the long term outcomes you want or need to achieve. To achieve these goals you need to break things down into objectives.
Typically, goals are open and unstructured in nature and can be subject to modification. Objectives, on the other hand, tend to be single achievable outcomes where there can be no ambiguity as to whether they have been achieved or not. Objectives are a means to an end and are shorter term. You need to achieve objectives if you want to achieve your goals which are essentially the ultimate result and are longer term in nature.
You may, for example, have a burning desire to be financially free. Quite frankly, that was my burning desire almost from the very moment that I started my banking career (yup, even before I returned to school to complete my MBA).
My goal was to become financially free by 50 years old. By financially free this meant I would not have to rely on employment income to maintain our lifestyle.
When you’re in your early 20s and you set that kind of goal I can assure you it is a long-term goal (eternity?)!
You might be different from me but there was just no way I could stay motivated if all I thought about was becoming financially free by 50 years old. To stay motivated I had to set short, medium, and long-term specific and measurable objectives.
To achieve our goal, we had to make a list of objectives. Making the list took time but that was the easy part. Prioritizing the items on the list and making the objectives specific and measurable…now that took a bit more time.
Let’s say for instance, one of your objectives is to invest $1000/month in publicly traded companies with a long-term history of paying increasing dividends every year. Well, this is a great but it is not specific and measurable. Not only that but if you have a boatload of credit card debt, a car loan/lease, student debt, you want to buy a home, and you want to start a family I strongly suspect investing $1000/month will very quickly get relegated to the end of the list in no time flat.
Furthermore, it is one thing to invest $1000/month in high quality companies like, Visa, Mastercard, Canadian National Railway, The Royal Bank of Canada versus companies that don’t have the same pedigree. You have to be specific as to the types of companies in which you will invest your hard earned money.
In addition to prioritizing the items on your list you also need to know your starting point.
Your journey to financial freedom is much like any other journey. Knowing your route requires you to know where you want to end up AND your starting point.
Planning your ‘route’ also means you need to plan how to adapt/modify your route. If your journey to financial freedom is going to be similar to our journey where it will take ~25 years, I guarantee you ‘stuff’ is bound to arise. You need to work through some ‘what if’ strategies.
Let’s say for instance a couple decides one objective is to retire $15,000 in credit card debt by the end of 12 months. The plan is to reduce this debt by ~$1250/month and is based on both members of this couple being fully employed. What happens if one member gets downsized and is unemployed for a few months? What is the ‘backup’ plan? Are there other expenses that can be totally eliminated from the very start of this one year period so as to free up some funds which could immediately start to be applied toward the reduction of this debt?
In addition to having a back-up plan(s), don’t forget that I indicated your objectives must be specific and measurable. Using the objective reflected above, you certainly don’t want to be checking your progress for the first time after 6 months have elapsed. You should be monitoring your progress at least monthly.
Frequent monitoring helps you see multiple ‘little wins’ which can then boost your confidence. If you don’t see multiple ‘little wins’ then you figure out sooner than later the reason(s) why.
Earlier in this article I indicated I strongly suspect you have some deep desire to improve your financial lot in life. I can assure you that investing can be enjoyable especially if you see that you are experiencing success. You have to, however, set yourself up for success and this means setting appropriate specific and measurable goals and objectives.
The beauty about having an online community of people striving to improve their financial lot in life is that we can offer each other encouragement. Please feel free to email JC and/or me at email@example.com. We would love to hear your story and to share ideas that will make everyone’s journey to financial freedom that much more enjoyable.
I wish you much success on your journey to financial freedom.
Thanks for reading!
Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.
Disclosure: I am long all companies mentioned in this article.
I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.