Mandatory Goals

While everyone's goals will differ based on their particular needs and wants, certain financial items are mandatory. You should list and prioritize the following goals, if you haven't achieved them yet:

• Save for an emergency fund: If you don't have three to six months of living expenses set aside in cash, then saving for an emergency fund should be on your list of goals. While three to six months is the recommended benchmark, you may want to save more. I've worked with clients who wanted as much as 12 months of living expenses set aside because that's the amount that gave them peace of mind. The amount you'll want to save will depend on how stable your job is, how regular your income is, and the amount of money that will make you feel comfortable on a daily basis. Generally, the less stable your job and income are, the more you'll want to save in an emergency fund.
• Pay off high-cost debt: If you don't pay off your credit card balance in full every month and have other high-cost debt outstanding (e.g., personal loans), then you should include eliminating this debt on your list of goals.
• Save for retirement, financial independence, and/or general life flexibility: Regardless of whether you think of this goal as retirement, financial independence, or just general life flexibility, setting aside money for these goals early and often allows you to build good habits, lower your spending rate, and benefit from the growth of your money for a longer time. If you work for a company, your employer may make contributions to your retirement account as well. You read that right: many employers will put money into your retirement account based on a percentage of what you contribute. That's kind of like getting an increase in your salary without even having to ask or negotiate. Talk about a no-brainer!

Optional Goals

Your optional financial goals will be dictated by your personal preferences. I like to group optional financial goals into several subcategories:

• Professional and educational: Goals that are career-related (e.g., start a business, start a side hustle), or that consist of improving your human capital (e.g., go to graduate school, take personal enrichment classes, join a networking organization). Be sure to refer back to the great work you did in Part 3 of the book to confirm your job goals, and the potential cost of those goals.
• Medium-sized savings goals: Goals that may take less than five years to achieve (e.g., buy a car, save for a wedding, save for a vacation, donate to charity, prepay mortgages and/or student loans).
• Large savings goals: Goals that make take five or more years to reach (e.g., buy a home, save for children's education).

Option 1: Prioritize Your Goals

At the beginning of this chapter, you had the opportunity to identify a number of financial goals with no real restrictions. Now, I want you to take a closer look at the goals you listed and categorize them into the following buckets:

• Must-haves: These are goals that you must accomplish to ensure your financial security – no ifs, ands, or buts. Your must-haves should include all of the applicable mandatory goals that we reviewed earlier, including saving for an emergency fund, paying off high-cost debt, and saving for retirement or financial independence. You may also choose to classify some other financial goals on your list as “must-haves” based on your personal values and needs. For example, job-related goals may fall into this bucket.
• Nice-to-haves: Nice-to-haves are financial goals that you could sacrifice without materially impacting your stability or happiness. These goals may include buying a house, buying a new car, saving for a vacation, and so on.

Once you've categorized your goals into must-haves and nice-to-haves, add up the monthly savings needed for each bucket. Do you have sufficient savings to set aside for all must-have goals, and some nice-to-have goals? If not, read on for more strategies you can use to make a workable plan!

Option 2: Change the Timetable for Your Goals

Initially, we assumed that you would start saving for all your financial goals today. However, you can alter the timing of some of your goals based on their level of priority to create a more workable plan. Let's say you had initially aspired to create an emergency fund, pay off credit card debt, and save for a house purchase within the next three years. If that wasn't a feasible plan, you could adjust your timing to save for your highest-priority goals (i.e., building an emergency fund and paying off credit card debt) within the next year. After achieving those goals, you could then divert all of your savings toward saving for a down payment.

Take my clients Corey and Hannah. When we started working together, they told me their main goals were to save for retirement, their child's education, and a home purchase. They estimated that they needed to save $3,000 a month to be able to fund their goals. The problem was, Corey and Hannah were only saving $2,000 a month. To bridge the gap, we discussed a variety of options. Switching to more-demanding, higher-paying jobs could fill the gap, but that didn't really align with their desired lifestyle or job interests. Neither did spending their limited free time pursuing side hustles to earn extra cash. We then walked through whether they could cut any other existing expenses based on the strategies discussed in Chapter 5, but we had already optimized their situation previously.

Given these restrictions, I worked with Corey and Hannah to tweak the timetable for their plan. They decided that their timeline for a home purchase was more flexible than that of their other goals. As a result, they agreed to focus on saving for college and retirement in the immediate term, and then begin putting money toward a down payment as their salaries increased.

Option 3: Revise the Cost of Certain Goals

Another effective strategy for creating a feasible financial plan is to amend the cost of your larger, nice-to-have goals, such as saving for a house, buying a car, and saving for a child's education. In the previous example, Mary and Carl had wanted to purchase a $500,000 home in five years, but let's say they can't get the numbers to work. By forgoing certain amenities, they might be able to instead target a $400,000 home, which would lower the upfront cost of their goal from $130,000 to $104,000.

A hot topic for many of my clients is saving for their child's college education. They may initially assume they need to fully fund the cost of a four-year, private university, but after taking into consideration their other goals, some decide to scale back and fund half the cost of a private college, or fully fund a public university instead.

Option 4: Eliminate Certain Goals

Joey Gladstone, a character on the '90s sitcom Full House, often got big laughs for using the catchphrase “Cut it out.”¹ You might apply Joey's surprisingly wise words to some of your financial goals if your plan still isn't feasible after using the other strategies we've discussed.

For example, saving for a vacation home may have sounded like a great idea in the beginning of the chapter when you were letting your dreams run wild. But you might decide to throw that particular goal by the wayside after weighing a few weeks a year in Cancun against paying off your existing debt. This may be the iterative process you go through to determine if any goals are expendable.

Option 5: Revisit Your Expenses

When all is said and done, your goals may still cost more than you can save each month. If so, I encourage you to refer back to Chapters 4 and 5, which provide guidance for modeling out and cutting your expenses. Take a closer look at these costs, and identify which ones you may be able to decrease in favor of your financial goals.