Having goals is a game changer.
For years, I didn’t have financial goals.
I’d max out my 401(k) (or TSP when I worked for the government) and, when my kids were born, put a set amount in their 529 plans. Then I’d go on my merry way, assuming that the 401(k) max and some amount in the 529 would be ducky.
After all, I had a legal career to build. I assumed that I’d get to a point where I’d probably make enough income that I just didn’t have to worry about money. (This is silly. You will always worry about money.)
It’s only after I started getting serious about managing our money that I started really thinking concretely about financial goals.
Many of my favorite financial blogs are written by folks with a very clear goal – financial independence. Mr. Money Mustache presents a compelling form of it. He retired young and spends his time parenting and doing whatever else he wants. Freedom is an alluring vision. Mr. Money Mustache didn’t like working; now he doesn’t. And there are other Financial Independence folks out there in the blog world; it’s a popular topic for reasons that are likely obvious.
The trouble is that I like being a lawyer. I feel like I’m a part of a big community of people – other lawyers – who I know and like. I like helping people. I find the law interesting, and I like figuring out the business of law. And, frankly, I really like the people who I work with. It took no small amount of sweat and luck to get here, but now that I’m here I’m pretty happy with it.
So even if I were financially independent, I’d still want my life to be pretty close to what it is.
As I read Mr. Money Mustache, I see him as a call to make decisions about your life, rather than to just let it happen to you. What I want with my money is to live that principle. If I spend a few thousand dollars on a vacation with my kids, I want the value to be worth the money.
So, here are my financial goals:
Goal one: to the greatest extent possible, make financial decisions such that they are rational and reflect the value of what I’m getting from the money.
This is, you’ll notice, more psychological than hard-core financial. If that disappoints you; that’s cool. More financial goals coming up.
Goal Two: Be ok if the worst happens.
We live in an uncertain world. My firm could tank. My practice area could be radically transformed. Someone in my family could get sick and I could decide to stop working.
I’d like to have enough cushion that if I needed to stop working because life took a bad turn I’d be ok. Many of these risks aren’t insurable. I think disability insurance is fine, and I have some, but I think it’s less important the closer you get to being able to self-insure. But disability insurance doesn’t cover everything.
Goal Three: Retirement
Frankly, I see this as a subset of Goal two. At some point I’d like to slow down substantially in my work. I’m not sure what I see my working life being like when my kids are off at college. I’d like to be in a position to make decisions about whether to keep working, rather than have to.
Goal Four: Have fun
I mean this in a very particular way – I don’t mean be able to buy expensive booze at a VIP table in Vegas. (which may be what hell would look like for me)
I mean that I like building and creating things. I like figuring out how things work. In the past, I’ve started a business and I’ve bought rental properties. I’d like to have the ability to continue to do this. I’d like to do it in service of goals two and three but there may be safer ways to meet those goals. I’m willing to take a little extra risk in order to have a little fun.
How am I doing on these goals?
Goal 1: I think fairly well, but I see definite room for improvement. I’ll give more info in later posts.
Goal 2: I’m not there, but I’m closing in. Ability to survive a major bad event depends on two things, income and expenses. Right now, our biggest expense is childcare, then mortgage. Beyond that, we’re at about $30,000 in less discretionary expenses and those could be cut more too. The more discretionary categories like charitable giving and vacations are a decent size, but I’m very comfortable with what we’re doing there. If we had to crash, I think we could get down to about $60,000 of spending, mortgage included.
If all our income disappeared tomorrow, we’d be ok for a good while. And most of these contingencies wouldn’t eliminate all income, they’d just reduce it.
Goal 3: I think we’re on track. The only real difference between 2 and 3 is the time horizon involved. We aren’t there, but I see it on the horizon.
Goal 4: This is a topic for more later, but I’m having fun working our money.
So, we’re on track but not there. And these goals, as stated here, are pretty fuzzy. More concrete numbers will be along later.