Setting goals is part of life. We all have to have goals. Believe it or not, you set goals all the time.
When you get up in the morning and have to be at work for a certain time, you have a goal. Get to work, don’t be late and get that morning coffee. But what about all of your medium and long term goals? How well do you set those goals? Have you achieved very many of your medium or long term goals?
There are problems when it comes to setting goals. If it were easy we wouldn’t have to have a goal. Throughout most of our schooling, we are taught to make goals but in my own experience, there was little focus on how to PROPERLY set a goal and make it achievable.
So what types of goals could this entail?
If you came to me and said: “my goal is to have $1,000,000.” Or “I want to bench press 280 lbs.” Those aren’t goals. Those are statements with no direction. You are just swimming around in your own thought process wanting something. It’s simply a desire to have those things that’s all that you’ve said. But what’s the difference what should your goals look like if those aren’t proper goals.
A goal is simple but complex at the same time. First, start with the end result, the “success” you want to have. What future do you see? Do you see yourself sitting on a beach for 3 months drinking margaritas? Or do you see yourself running a successful business? No matter what the goal is the structure needs to be the same.
Set an end result (the goal)
If your goal was to have $1,000,000, this is how you need to make your goal achievable.
We know the end result, $1,000,000. First, how are we going to gauge the success of our goal? Is it $1,000,000 in the bank? In the stock market? buildings? Cash? Which is going to be the best gauge of success?
What will you use to measure your success?
Well, having $1,000,000 sitting in a bank account is pretty cool but is it the best option for all of your money? Not so much. Money that is just sitting in a bank account is well, just sitting in a bank account. Your money would be collecting very little interest and not growing just kind of, existing without a purpose. I would like to see my money grow and get more and more. So, having $1,000,000 in an account isn’t how I would gauge my own success.
What about $1,000,000 in the stock market? That will help to solve our problem with the bank account. What are the downsides to the stock market? Well, on average the stock market has gone up about 7% per year over all the years. That’s on average, over a very long time. There were times when the stock market went down by a lot too. People lost millions instead of getting millions. The biggest inherent problem with the stock market is this.
If I have $100,000 in the stock market, I would expect a rough return of around 7% annually. But, if the stock market goes down it affects my returns for years. Let me explain.
If everything is going good, the $100,000 I have in the stock market would grow to 107,000 after one year. Year two it would grow to $114,490, year three, $122,504 and so on.
Now, if I have one bad year how would that change the outcome? If I am still starting with $100,000 and the stock market went down 7% rather than up. I would have $93,000 after the first year. That’s a difference of $14,000 after the first year in comparison to a 7% increase on average, so in order to get back on track by the end of year two and have my money be equal as if the loss never happened, I would need to make considerably more because in year two there would be another 7% gain.
After year two when everything was good, I would have $114,490, which is a difference of $21,490 from the $93,000 we started year 2 with. In order to bring my $93,000 up to where it “should” be based on 7% per year, I would have to make 23% on the stock market in year 2 alone. This is very unlikely. $93,000 x 1.23= $114,390. This is why a loss can change your money for many years to come.
All of that aside, having $1,000,000 in the stock market can be a good gauge of success. A Lot of people use it to gauge their success. It’s all a personal preference.
What are some other ways?
What if you had $1,000,000 in rental properties? Would that be a good gauge of success? Would having that much in rental properties be easier or more difficult than the Stock Market or a Bank account? Rental properties have work that needs to be done with them. Rental properties are a more involved investment. You can hire out property managers and such but you will still be involved in the property to an extent.
The biggest advantage of having rental properties as your gauge of success and success in the goal will be the use of leverage and the cash flow it will create. The use of leverage is borrowing money from Banks and Lenders to increase your return on investment (ROI). That’s using other people’s money to buy a property and getting the benefit of more income in doing so. Let’s do a comparison of stocks and rental properties.
So, if you had $1,000,000 on the Stock Market all in Dividend-paying Stocks at 5%. A Dividend Stock is a Stock that will pay you a percent of the share price for each share you own, typically between one and 4 times a year. That investment would be generating $50,000 a year in cash flow. (5% of $1,000,000) That’s cool but, in order to have that much cash flow from Stocks, you need to have the $1,000,000 in the Stock Market.
Where-as with Rental properties, you get the use of leverage, borrowing other people’s money. If you use leverage and the total cost out of your pocket for all your properties is 30% of the total value(20% down payment and 10% repairs and fees). You need to have $300,000 in order to control $1,000,000 in rental property. The income from $1,000,000 in rental properties will be roughly $50,000 a year as well but, you only needed $300,000 to achieve it, not the full $1,000,000. This in itself will help us achieve our goal of $1,000,000 significantly faster.
So now we have determined how we will gauge our success and our proper goal looks like this so far;
- I want a million dollars in rental properties generating $50,000 a year in cash flow.
What timeline are you setting for completion?
Not bad so far. The next step is how long to achieve our goal. Setting a goal to have $1,000,000 needs to be a longer goal because, especially if you are starting from 0, it will take some time to get the ball rolling and start picking up momentum toward success. What would be a reasonable timeline? 5 years? 15? Let’s split it and say 10 years.
With each goal, you need to make a realistic timeline. You shouldn’t say I need $1,000,000 in 2 years starting from 0. It is possible but you are more apt to be setting yourself up for failure rather than success. Now our goal has another aspect and looks like this;
- I want a million dollars in rental properties generating $50,000 a year in cash flow in 10 years.
What steps will you take to make it a reality? Always try and be specific.
So how are you going to achieve this goal? What does it look like in your mind? More important what has to happen for this goal to materialize and manifest itself into reality? Well, you start small. Something like, I am going to get a full-time job to support myself and my family.
That takes care of the everyday expenses, now you need to take care of the investment expense to start to drive your income up and up into the $1,000,000 mark.
Getting creative in how you’re making money and developing specific skills is what will separate you from everyone else. This doesn’t just revolve around money either. Any goal you make for any result, being creative in how you achieve the goal will make you more involved and driven to success. You don’t want to be like everyone else. If you look around and everyone is doing the same thing and no one is anywhere near your goal or their own, don’t do the same things that they’re doing.
You won’t achieve your goals along the well-beaten path. If it were easy you wouldn’t need to make a goal in the first place.
So you will have a full-time job to support your family but, that doesn’t help you get $1,000,000, you need to do more. So, start a side business/hustle. How much time will you take every day to make or do something that will generate you an income for your investment? Let’s say 2 hours a day. Now you will have a full-time job and spend 2 hours a day working on a side business reinvesting all the income you have back into the business to generate more. Your goal is getting more in-depth now. It’s starting to come together like this.
I want a million dollars in rental properties generating $50,000 a year in cash flow in 10 years. I am going to make this happen by getting a full-time job to support my family and start a side business working at least 2 hours a day and reinvesting “x”% of the money from it back into the business to generate more returns and the rest into rental properties.
What actions need to happen to reach each step?
Now, most people can’t just start a business and make everything happen all at once. Lots of us don’t know anything about business or what skills will be involved or needed. Or if you do know the skills, practicing those skills will make them better.
So there’s more still needed for your goal. A learning portion, if you devote 1 hour every day to learning skills. Any skill that you think will help you along your path you will always be better for it.
The smartest person in the room will always be the one who can listen and learn rather than think they are the smartest just to be proven wrong by someone smarter than them. Admit you don’t have to be the smartest you just have to learn from people who are smarter than you.
All of a sudden your goal has depth, it has meaning instead of being a statement like when we started, it is achievable. It has a path that can be followed, a path of your own, with your own thoughts and ambitions at the center.
There’s one more step though, write it down and make it known. Talk to your spouse your family and friends. Whatever your goal is, writing it down and making it known is the first action toward success.
Remember the parts of a goal. It’s not just a statement. And let’s break down the proper parts of our goal.
Parts Of A Goal
- Set an end result (the goal)
- What will you use to measure your success?
- What steps will you take to make it a reality? Always try and be specific.
- What timeline are you setting for completion?
- What actions need to happen to reach each step?
Break It Down
What’s the end result?
I want $1,000,000.
How will you measure your success?
I will measure my success by having $1,000,000 in rental properties generating $50,000 a year in cash flow.
What steps will you take to make this happen?
I will have a full-time job to support my family and start a side business to generate investment income.
What is the timeline for completion?
I will achieve this within 10 years.
What actions will you take to reach each step?
I will create a resume and get a full-time job to support my family. Then, I will start a side business devoting 2 hours a day to it and 1 hour a day toward learning and developing new skills. Any money generated by the business I will reinvest “x”% back into the business to accelerate the income and the rest into rental properties.
You can make achievable goals.
It’s all about a plan, not just an idea. The hardest part about a goal especially if you chose a big goal as we went through here is starting. Any goal you have, starting is the most important and most difficult. It doesn’t matter how big or small the goal is, just start. Make something, do something, anything and when the ball starts to roll each new thing you do to achieve the goal is a little extra push to get the ball rolling faster and faster. The faster the ball rolls the closer you get to success.
Believe in yourself and start something great today, not tomorrow.
