Yesterday, we made up a list of ten goals that derive directly from our values.
Now (and for some of you, finally), we start talking a little bit about numbers.
Let’s get right down to business. Take ten sheets of paper and at the top of
each sheet, write one of the goals you defined yesterday. On each of
these sheets, you’re going to define some specific milestones for each of your
goals.

For each of the short term goals, I want you to define five specific actions:

I will do this in the next three days.
I will do this in the next week.
I will do this every week.
I will do this in the next month.
I will do this in the next six months.

Some of these will be information gathering and have no cost. Others will actually
require some investment, usually the one that happens every week.

For example, yesterday I mentioned that one of my short term goals is doubling
the value of my son’s 529 college savings plan in the next year. Here’s what my
five specific actions look like:

In the next three days, I will get the balance of my son’s 529 account, along with
the data on the annual returns of each of the investment options in the plan.
In the next week, I will determine how much I need to invest in the coming year
to double the account balance and also estimate what the return for the coming
year might be.

Every week, I will invest 2% of what I calculate is needed to double the balance in
the coming year.

In the next month, I will evaluate all of the different funds available for my son’s
529 and choose a fund that I feel is the best match for him.

In six months, I will check in on the account and see how he’s doing for the year,
see how the various funds are doing for the year, and reconsider my investment
choices.

Generally, the model outlined above works well: gather information in the next
three days, plan a baseline amount you’ll need in the next week, save an
appropriate amount every week, investigate the details in the next month, and
review things in six months. If you do this, you’ll almost always meet your annual
goal.

Now, for each of the long term goals, I want you to define five specific
actions:

I will do this in the next week.
I will do this in the next month.
I will do this every month.
I will do this in the next year.
I will do this in three years.

Some of these will be information gathering and have no cost. Others will actually
require some investment, usually the one that happens every month.

For example, yesterday I mentioned that one of my long term goals is completely
owning a wonderful house in twenty five years. Here’s what my five specific
actions look like:

In the next week, I will gather information a selection of potential houses that
reflect what I plan to buy immediately and what I plan to buy in fifteen years.

In the next month, I will calculate how much I will have to spend per month on
mortgage, insurance, and taxes on the lower-end house, and also calculate how
much the nice house will cost in fifteen years.

Each month, I will save 25% of a mortgage payment for helping me get ahead on
payments when I purchase the first home. This will enable me to “trade up” more
effectively when the time comes.

In the next year, I will buy a home that is in the lower house bracket and switch
the extra 25% from a savings account to a direct payment on the mortgage.

In three years, I will sit down and re-evaluate what my “dream home” is like and
refactor my plan accordingly.

By doing this, I break down something that seems far-off (a beautiful big house to
retire in and for my children and grandchildren to enjoy) into smaller pieces that
I can do right now. I also find it useful to find an image that captures a long-
term goal and place it in a place that I’ll see regularly. This way, the end
goal is always in sight; it’s a constant visual reminder of where I need to go.

Now that you’ve defined these plans, you have specific things that you’re
saving for and spending your money on that are in line with your
values and goals. Whenever you go to spend money, pause for a second and
think about your values, goals, and plans, and ask yourself if that money
expenditure is really helping you reach your goals or is really reflecting your
values.

You should strongly consider making up a schedule that combines all of
your plans together. What will you do in the next week? What will you do
every week? What will you do in the next month? What will you do every month?
A schedule that keeps you following your plans will help with this.

One week from now, you should have some numbers that will show you what you
need to be doing to reach your goals. The amounts might trouble you, but don’t
worry. In one week, we’ll take these numbers and use some techniques to
carefully evaluate what they really mean - and how you can make them count for
more than you think.

Before I did this exercise, I often found that, even though I often realized it wasn’t
a good idea to spend, I would still spend money anyway. Why? I didn’t have any
sort of concrete plan for what to do with my money, especially not one that was
larger than saving for a new gadget or toy. Now, whenever I’m tempted to spend
money in a frivolous way, I think about what’s important to me, and it directly
connects to a plan for spending my money.

Tomorrow, we’ll start looking at your money.