Chart a course for the Island of Financial Freedom
Have you ever tried to get somewhere new without first looking up the directions? Probably not. But if you did, you'd likely get lost somewhere along the way. When you're charting your course for the "Island of Financial Freedom" (aka becoming financially independent), if you don't set some financial goals and make a plan on how to get there, you might end up on the rocks.
For now, let's think about setting these three goals: short-, medium- and long-term.
Short-Term Goals (from now to 1 year)
Say you want some Super-Cool-Thingy. The Super-Cool-Thingy costs $100 and you want to have it by next summer which is 10 months away. Just divide the cost of the goal by the amount of time you have to reach it. To reach your short-term goal of having enough money to buy that Super-Cool-Thingy, you'll need to save $10 a month. Can you do it?
Medium-Term Goals (1-10 years)
Maybe you want to buy a car, save for college or move out of your parents' basement by the time you're 20. These are medium-term goals. If you don't think you can reach your goal when you want to, modify your goal a bit—either save more or save for longer.
Long-Term Goals (over 10 years)
These goals could be 10, 20, 30, 40 years out and beyond. Want to travel the world, buy a house, retire early, have kids or just lots of dogs? Let's say you want to have $1 million in 40 years. You might be thinking that means you have to save $25,000 a year starting now—almost impossible for a 13 year-old! The good news is you don't have to actually save one million one dollar bills. There's a trick we share later this month where your money starts making money for you. For now, just have that long-term goal in mind and start socking away your cash.
Whether it's your phone, a sticky note, or a piece of paper, make a note of your short-, medium- and long-term goals. Then hang them in your room, in your locker or text them to yourself. You're more likely to achieve them if they're right in front of your face every day. And we're going to show you how.
Follow our Financial Literacy Month series to get financially fit in just 30 days.
James McKenna and Jeannine Glista are the co-creators of Biz Kid$, a national financial education initiative based on the award-winning public TV series. They also are the authors of the seriously smart new book How to Turn $100 into $1,000,000 (out this month from Workman Publishing, $13), which outlines in detail every step you need to take to make your million.