To Achieve Financial Goals, You First Have to Set Financial Goals

financial goals come down to planning and implementation
Financial goals come down to planning and implementation

“You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” Turns out, Yogi Berra might have been a half-decent financial planner.

I am by nature a goal-oriented person. Once I know where I’m going, I make a plan and work towards it, with what I think is probably an above-average level of focus. While this means that I disapear from my friends’ (and somtimes even family’s) view for weeks or months at a time, once I’ve got a goal in mind, I focus a lot of energy attaining that goal. This approach generally works quite well for me.

And yet it occurred to me several months ago that I had no specific goals for my finances. I hope to retire some day, I hope to pay off my house some day, and I hope to be able to pay for life’s little surprises, (like a new water heater this past winter) without having to go into debt to do it. While those are all good goals, they are far from specific. Also, I had no specific order in which I was trying to achieve these goals; house first, or large passive income first? What about simultaneously? I have come to realize in the past year or so that because I didn’t know exactly where I was going, I was having trouble getting there.

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Much Ado About Cell Phone Contracts

Cell phone contracts are evil
If you can’t afford to pay upfront, you can’t afford a phone.

The Canadian Radio-Television Commission (CRTC) recently announced that starting in December 2013, customers would be able to walk away from cell phone contracts after two years without penalty, even if they had signed contracts for longer terms. (The CRTC ruled on a few other issues, as well, but the two-year walkaway is the focus of this post.)

I know I’m probably not going to be too popular for saying this, but I think this is a case of the CRTC stepping in to save people from themselves, and it’s not going to work. People are going to get even angrier when the other shoe drops, which it inevitably will. At the end the day, consumers will (still) have no one to blame but themselves.

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The Rule of 72

72When comparing the rate of return on investments, it is helpful to have a consistent standard.  By far the most common standard is to simply compare the annualized rate of return.  If investment A return 3% and investment B returns 5%, the risk of the two choices being equal, the obvious choice is investment B.

That is good as far as it goes, but what does it really mean in terms of long-term growth?  In other words, how meaningful is that 2% difference?

The Rule of 72 allows you to measure investment returns in term of time instead of percentage points.  If you use doubling time (how long will it take for money to double) as a standard of measure, you can see how long your investments will take to bear fruit.


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