“Matthew” writes in with a thought-provoking concern:

I’m only 37, but lately I’ve come to the realization that I may be having a mid-life crisis. To even write it down feels stupid and cliche’, but I think it best explains what I’ve been feeling. I don’t want to bore you with the details. How this pertains to you & your site is that over the years I’ve had various goals, such as graduate college, earn my CPA license, get a great job etc. Most of them were achievable within just a few short years. My next goal is to become debt free and I’ve come to the realization that it will take some time for that to happen. Beyond that, the only real goal I have for myself is retirement and that is pretty far down the road. Ultimately those distant goals have been the source of my depression. The feelings of ‘is this all there is’ starts to sink in and then I started disliking going to a job that I love. I spend my thoughts thinking about how things are pulling me in directions I don’t want to go. I’ve recently decided that I need to focus on my goals and create some shorter term goals to help get through my depression and frustration.

I think Matthew hits upon the real problem with long-term goal setting – there’s no immediacy.

Humans are hardwired to focus on the short term. The vast majority of our thoughts are in the present or extreme short term future. We’re thinking about what we’re reading right now. We’re thinking about our to-do list for today. We’re thinking about the birthday party we’ve got planned for next week.

Rarely do our thoughts focus on events more than a few months in the future. These events, for the most part, don’t feel quite real to us. They feel trapped in the mists of time, so we don’t see them clearly – and thus rarely think about them in a concrete fashion.

This gets us back to Michael’s problem. If all of the things we’re looking forward to in life are shrouded in the far-off future, we’re left with little to look forward to in the short term. This, unsurprisingly, leads to unhappiness. We feel aimless. We wonder if this is all there is in life. And sometimes we can become depressed.

The solution, I’ve found, is to keep busy in the short term, both with short term things and with smaller projects that fit in as part of the bigger goals I have in life. Here are some suggestions to chew on.

Keep a full social calendar. Organize your time so that you’re busy with something most evenings instead of sitting at home. A wise old friend of mine used to say that “the devil makes work for idle hands.” I think she meant that the more free time you have, the more time you have to dwell on things and convince yourself of negative thoughts. This has certainly been true in my experience.

In Michael’s case, why not get involved in community organizations that interest you? Many such groups would love to have a CPA as a treasurer for the group and it would allow you to keep busy, meet interesting people, and so on. If this doesn’t fit, seek out groups that revolve around your personal interests. Or, if nothing else, pencil in a weekly dinner party and invite friends to it.

Develop – and accomplish – month-long projects. What would you like to accomplish in the next thirty days? Pick something audacious but not back breaking, yet something that will genuinely improve some aspect of your life. Recently, a friend of mine read the entire Bible in one month and is now following it with the Qu’ran in one month so that she could better comprehend some of the social conflicts between Christianity and Islam. Another friend worked towards being able to do 100 pushups in one straight stretch at the end of the month.

Michael, sit down and make a list of five or so things that, if you accomplished them in the next month, you’d really be proud of and happy with yourself. Choose one or perhaps two of them and focus on them intently. Keep that goal central in your mind throughout the month and put continual effort towards it. At the end of the month, you’ll find you’ve improved your life in some regard. Then do it again. In a larger context, such “thirty day projects” really serve to improve a person over time, albeit in a piecewise fashion. (I’ve got a great post on this coming up soon.)

Seek out smaller projects (one to three months) that fit in the context of your larger goals. For people in Michael’s shoes, they have long term goals in place but the stepping stones to reach them are sometimes unclear. They might know what kinds of things they need to do to get there (spend less! network more!), but making that into something tangible is tricky.

This is a perfect time to stop and ask yourself what sort of building blocks you could have in place that would make reaching that big goal easier. For example, if you’re trying to get a promotion at work, a new certification might be useful – or a serious upgrade in your presentation skills. If you’re trying to save for a big, long term goal, a major project that results in something that will save you significant money can be really worthwhile.

Michael has a long term goal of debt freedom and he likely has a “number” he wants to hit each month in terms of extra debt payments, but that’s not really a project per se.

Instead, he should try something else big and audacious. Michael, why not start a three month project to make your home as energy efficient as possible? Air seal your entire home. Install a programmable thermostat. Check the insulation and install more if it’s recommended. Put all of your home electronics on smart energy strips. Switch all of your light bulbs to CFLs and LEDs. Perhaps even replace your windows, doing them yourself, of course. This is a huge project that involves a lot of work – it’ll eat up a lot of your spare time – but at the end of it, your energy bill will drop by half or more and you’ll likely increase the resale value of your home.

Another project: learn exactly how your car works. Teach yourself how to do every single maintenance task that needs to be done for your car yourself. Not only is it less expensive, but once you know how to do these things, you can do them for pretty much any car you come across. It’s another skill in your belt that’s a direct money saver for you and might be a skill that you can utilize to help friends.

These are just a few examples. There are many more floating around out there.

Find a personal passion or hobby to channel yourself into. What do you enjoy doing in your spare time? Most people can name some things. The lucky among us names one or two big things with a huge smile on their face – those are the people that have found their passions.

Seek out your passion by trying lots of new things. Go to single meetings of lots of different community groups. Try out activities you’ve always wanted to try but never seemed to find the time. Learn how to play a musical instrument. Teach yourself a foreign language and travel to that country. Take up golf – or competitive Scrabble. Learn woodworking. Whatever it is that itches inside of you, give it a shot and see where it takes you. If it fizzles, try something else. But always seek your passions – and when you find them, you’ll know. They’ll flip you upside down and change your life.

Good luck.

A few weeks ago, my wife and children and I spent the weekend visiting several members of her extended family. On the final morning of the visit, I sat around the kitchen table with my wife’s grandfather and uncle and the conversation turned to the future. Her uncle turned to me and said, “What do you think you’ll be doing in five years?”

I didn’t really have an answer.

Sure, I have lots of long term goals of all kinds. My wife and I want a house in the country, of course, as I’ve mentioned many times. I’d like to get a novel published, one that I’ve been working on for a long time. Financial independence is a big goal, of course. I know, in broad strokes, what my life will look like in five years, barring anything I can’t predict.

But when I look back to the goals I’ve been successful with in life, they’ve been very, very specific in nature. If I set a goal of not spending any frivolous money for a month, I can achieve that goal because it’s clear to me what I need to do to get there.

On the other hand, with the less tangible big dreams in my future, I find myself a little more aimless. I have a hard time tying those big dreams to actions I can take today, so I’ll sometimes forget about them.

The challenge for me is this: I know where I want to be in five years, but the road to get there is sometimes covered in fog. I don’t have a good grasp on the things I need to be doing along the way – other than generic things like spending less than I make – in order to reach those goals.

On the way home, her uncle’s comment stirred me into action. I want to set a few very specific and clear goals for the future, along with very concrete paths on how to get there. Doing this lets me know what I need to be doing all the time to reach the things I want.

So, without further ado, here’s where I want to be in five years. I’ve set up three very specific goals, along with the path to reach each one.

Goal #1: Total Debt Freedom
That means paying off our entire mortgage, which has a balance around $165,000, as well as all other remaining debts. In five years. Including remaining student loans and auto loans, that adds up to about $190,000.

What can I specifically do this month to achieve this goal? Each month between now and October 31, 2014 (when my five years are up), I would need to knock an average of $3,200 off of my total debt balance. That’s an incredibly high number, one that pushes me to really bear down on our situation. In the first few months, I simply won’t be able to reasonably apply that much towards the total balance.

What else can I be doing to support this goal? The biggest thing I can do to support that goal is to make the $3,200 a month goal as reasonable as I possibly can. This means coming up with additional ways to earn income. Thus, each month, I need to develop a new potential avenue for income related to The Simple Dollar and my other endeavors. Preferably, these take the form of passive income – I can invest a substantial packet of time once and then enjoy the fruits of that labor over time. This would mean designing more “downloadables,” perhaps creating a few self-published books that are collections of posts organized in a logical fashion, and other such avenues.

Goal #2: Learn a New Language
By “learn a new language,” I intend to learn enough so that I can engage in an intelligent conversation with a native speaker of said language on pretty much any topic, and I’d be successful if I were to visit the countryside of a nation where everyone only spoke that language and no English to help me out. This is something I intend to do with my family in the future.

I’m not entirely sure which language, but I’ve narrowed it down to four options: German, French, Italian, and Norwegian. French and Norwegian are slightly in the lead.

What can I specifically do this month to achieve this goal? The goals for making this work are much more specific. Each weekday, I could spend an hour in language training using a tool like Rosetta Stone until I’m familiar with many of the words of the language and can hammer through basic conversation. Once I’m there, I would just continue to immerse myself in the language, listening to radio in that language as I worked and so on.

I’ve had a lot of success with short-term immersion in other languages in the past, but I never subjected myself to continued practice of the language.

What else can I be doing to support this goal? I live near a university, so one option would be to enroll as a part time student and take classes in my language of choice. This would enable me to gain some additional practice in actually speaking the language.

To put it simply, the best way for me to learn is to seek out every opportunity I can to immerse myself. The best way to start, though, is in my home.

Goal #3: Get a Novel Published
Right now, I spend maybe a few hours a week working on fiction, usually turning out a short story in that timeframe or editing/polishing an older one. I completed a novel several years ago, but when I look at it now, I deeply dislike it.

I actually enjoy writing fiction quite a lot, perhaps more than the essay-style writing I do on The Simple Dollar. I can purely focus on story and character rather than passing along information directly.

So why not take advantage of my situation and see if I can get my feet wet in the fiction world?

What can I specifically do this month to achieve this goal? Each month, I need to finish five short stories. By finish, I mean write a first draft, let it sit for a month or so, re-read it and polish it, and perhaps repeat the “let it sit and polish it” routine a few times. From there, I’ll pass the stories to my wife and let her choose the best one, then I’ll attempt to publish that one (and perhaps put the others out there on my personal site).

Once I feel much more adept at fiction (wait… does anyone really feel adept at writing? I still feel like an amateur and I’ve written millions of words over the past several years.), I’ll begin to tackle a novel that’s been forming in my head for a very long time. I’ll start that at roughly the two year mark.

What else can I be doing to support this goal? I should talk directly with the people I know in the publishing industry (thanks to my personal finance books) and see where they point me. I also need to put substantial effort into getting my good stories published so that I’m noticed in the fiction world.

Your Turn?
Now it’s your turn. Where do you want to be in five years? Can you pick out three specific goals that you want to achieve? From there, can you break those goals down into specific pieces that you can start working on now?

Setting goals have helped me get to my current station in life. There’s no reason why they won’t help me keep climbing the mountains to my dreams.

A recent Boston Globe article entitled “Ready, Aim… Fail” discusses the failure of setting a major goal at GM:

In the early years of this decade, General Motors had a goal, and it was 29. Determined to boost its flagging profits and reverse a long, steady fall from postwar dominance, the automotive giant did the natural thing: it set a goal. The company pledged to recapture 29 percent of the American market, the share it had ebbed past in 1999. The number 29 became a corporate mantra, and some GM executives took to wearing lapel pins with the number emblazoned on them.

It didn’t work. GM never did regain 29 percent of the market, and today, facing the possibility of bankruptcy, it looks even less likely to do so. The lapel pins are gone, and that number isn’t much heard from the company.

And while the causes of GM’s woes are many – from poor design to high labor costs to a prostrate economy – industry analysts argue that one of the most damaging things the company did was to set that goal.

In clawing toward its number, GM offered deep discounts and no-interest car loans. The energy and time that might have been applied to the longer-term problem of designing better cars went instead toward selling more of its generally unloved vehicles. As a result, GM was less prepared for the future, and made less money on the cars it did sell. In other words, the world’s largest car company – a title it lost to Toyota last year – fell victim to a goal.

In other words, GM set an audacious goal but they sacrificed too much to get there, which not only made it impossible to reach that goal, but undermined what they already had. They set a long term goal, but they used short term tactics to get there. Instead of long-term planning (designing better cars, streamlining their production models, offloading less-profitable business segments), they went short-term by doing things like drastically cutting prices, offering loans that undermined their financing business, and pushing forward with poorly-optimized manufacturing facilities.

It’s easy to apply this idea to personal finance. Let’s say, for example, that your goal is to be debt free. You need to ask yourself a very simple question: is your goal simply to reach a point of debt freedom at all costs, or do you want to be sustainably debt free?

If your goal is to just reach a point of debt freedom at all costs, then you’re likely to engage in things like cashing out your 401(k), emptying your emergency fund (and not building one at all), going hyper-frugal, delaying necessary repairs and maintenance, and so on. This plan is the quickest way to get to debt freedom if everything goes perfectly, but it is far from a guarantee. If something goes wrong, you’ve got very little protection against it and your only recourse is more debt.

On the other hand, if you seek sustainable debt freedom, it will take substantially longer to get there, but once you’re there, you’ll stay there. This plan involves building an emergency fund, saving now for retirement and other big future expenses (like future vehicles and education), keeping up with proper maintenance on your home and health and automobiles, adopting reasonable lifestyle changes that can be sustained and still leave you with a high quality of life, and so on. These moves won’t get those debt bills paid nearly as fast, but when you finally do reach debt freedom, you won’t be facing a devastated personal finance landscape.

I look at it much like climbing a tree. Sure, you can make it to the top much faster if you leap wildly from branch to branch, jumping and reaching out for your next position and quickly swinging upwards. However, doing that puts you at a big risk: you can easily fall right to the bottom of the tree and possibly break an arm or a leg. On the other hand, you can climb the tree a bit more slowly, choosing your holds carefully and positioning your feet strongly. Using that technique increases the likelihood that you’ll make it to the top, albeit not quite as fast.

A big, audacious goal is powerful and useful. It gives you something to strive for and it pushes you to do better than before. For example, my big, audacious goal is the country house I’ve often mentioned on here – a nice house on a piece of land in the country with a small barn and room for a big garden and a chicken pen. It pushes me to be frugal and to make good personal finance choices.

However, if you follow your big, audacious goal too blindly, you’ll fall from the tree. I might be able to get that big house a bit faster if I stripped my Roth IRA and my 403(b) and my emergency fund, stopped performing maintenance on our car and our home, and cut out all of the little things that make our life enjoyable. But what happens if an emergency occurs along the way? What about when I finally buy that house – and I realize I have no retirement savings and have missed many years of compound interest, I have no emergency fund, and I have two poorly maintained vehicles? I’m facing another mountain, with goals that I can’t entirely recover (those years of retirement savings and college savings are gone forever).

Reach for your big goal – but do it from a strong foundation. Get an emergency fund in place. Start saving appropriately for retirement. Take care of your requirements at work (before reaching for the big promotion or the second career). Maintain the things you own. Take care of yourself.

That foundation will make any big goal reachable. Without it … you might find yourself going the way of GM.

Here are a few recent emails I’ve received. From Connie:

Over the last few years, I’ve taught myself to play acoustic guitar and lately I’ve started writing a lot of songs. I’d like to record them and share them with others and maybe eventually start playing concerts, but every time I think about it, I want to do something else. It just seems so big.

And Andy:

I liked your article on emergency funds. I want to get started on my own, but I really don’t know where to start. It seems like I spend all of my money before I get around to saving it.

And Zelda:

Could you write a step-by-step post about how to get a garden started? I’d love to have a big vegetable garden and I even have the spot picked out, but I don’t know where to start. It seems like a HUGE task.

I started writing responses to each of these emails, but it didn’t take long for me to realize that most of the points I was making in my responses were the same from person to person. In each of these cases, the reader is intrigued with a big goal, but the big goal seems too big and thus out of reach.

There are a few keys to unlocking any big goal you might face in life. Let’s walk through these key steps, using Connie and Andy and Zelda – and myself – as examples.

Define That Goal Clearly!
Most people have big dreams. I know I certainly do. I have dreams about publishing a series of novels, seeing them in bookstores, signing copies regularly, and seeing a short story of mine published in The New Yorker. Zelda wants to have a big garden. Andy wants to build a six month emergency fund. Connie wants to record an album and play a concert.

While it’s fun to daydream about these things, they’ll never happen unless you establish what exactly it is that you want. The key is to get started, and getting started means knowing clearly where you’re going.

I’ll start off with my goal. I want to write fiction. But what exactly does that mean? What I really want to do is tell a long-form story that really touches people. That, in the end, means writing and publishing a well-promoted novel that has a chance of being read by a wide audience. Doing that fulfills many of my wandering daydreams. Since I have little control over the publishing process, my main focus should be on writing a great novel and preparing for publication by getting other, shorter pieces published.

Zelda’s goal is to have a big garden. But what does that mean? Does she want vegetables? Herbs? Flowers? From her description of the situation, she likely wants a vegetable-focused garden. Where will it go? She has a spot picked out for it. What plants will she plant? That’s a decision Zelda needs to make – what grows well in her area, for starters, and what vegetables does she most enjoy?

Andy wants a big emergency fund. The key here is to define a dollar amount. How much does Andy spend each month? How many months’ worth of living expenses does Andy actually need? Also, where will Andy be saving the money?

Connie wants to record an album’s worth of music and play a concert. What exactly does that mean? Is Connie shooting to self-release an album? Does she want to play a concert in a small coffee shop or is she dreaming of a big arena? The best goals rely mostly on you for success, so Connie might want to shoot for recording her own album and playing a very small show in a local venue – perhaps any concert will do, or perhaps she can set a goal of an audience of fifty people. She could easily converge the two goals – perform a show with fifty people there and have copies of her CD on hand to sell to the audience.

The key is to change your dreams into something specific and something that relies mostly on your own behavior and not on the behavior of others. Connie, Andy, and Zelda (and me) should spend some time adding details to the big goal, making it as clear as possible what that goal entails (and thus making the steps to get there that much clearer).

What is your goal? You’re dreaming about something right now. Write it down. Tear out the pieces that require reliance on someone else. Then, make it specific – what exactly are you dreaming about?

Figure Out the Big Steps
Once the goal is concrete, it’s time to figure out a plan to get there.

For my goal of writing a novel and some short stories, I need to bone up on my fiction writing. This means prescribing to a steady diet of two things: reading good fiction (to learn technique and style) and practicing my own writing. Thus, my plan should revolve around a steady diet of reading good fiction each day along with focused fiction writing, starting with short stories and later growing into longer pieces.

Zelda needs to start off by developing a garden plan (what will she plant and when), then developing a calendar of the tasks that need to be done over the spring, summer, and fall months.

Andy needs to open an account for his emergency fund and set a specific target for saving each week or month. I recommend making each saving target lower than planned, simply because it’s easier to get into a routine of clearing small hurdles than to struggle at big hurdles, fail, and get discouraged.

Connie needs to get into a routine of writing new music and performing it, building towards a collection of songs that she’s satisfied with which she can record. Home recording is probably the best option here, as it only requires a microphone and recording software.

What is your plan? What steps go into achieving the big thing you want to achieve? Start breaking down the big dream into smaller and smaller pieces until they begin to feel like things you can handle.

Figure Out the First Step
When starting a big project, I often find it useful to set aside a block of time to accomplish a big first step. This way, you can feel an immediate sense of accomplishment as well as some personal investment in the big goal.

For me, this could mean spending a Saturday afternoon churning out a complete short story and reading a certain number of short stories written by others. I’ve been reading quite a few short stories as of late by swapping for short story compilations on PaperBackSwap and hitting the library.

Zelda might want to spend a Saturday afternoon preparing her selected area for gardening. This means calling a few days in advance to make sure she can till there, renting or borrowing a tiller, then turning over the land. She might also spend some time developing her plans as to what she intends to plant, as well as making a stop at the local gardening store to pick up seedlings.

Andy can get started by gathering up his receipts and statements and figuring out exactly how much he spends in a month – and what he can easily afford to save each week or each month. Then, he can open up a high-interest online savings account and then set up an automatic savings plan with that account, automating his savings in that account.

Connie might simply want to seek out a venue where she could play for free or for a low fee (like a local coffee shop) in order to get her feet wet with performing. Then, she could devote some time to developing a set list of what she considers her best songs and practice running through them several times to get the butterflies out.

What is your first step? What could you do on a Saturday afternoon to really get your feet wet with your big goal? Think about it, then pick a day where you can devote several hours to making a real start.

Make Microgoals
Once the ball is rolling, it’s vital that you give your project the regular upkeep that it deserves. One effective way of doing that is to set microgoals – very simple goals that you can accomplish in a few days or a week that move you ever closer to your bigger goal.

For my goal of writing, I’ll commit to a diet of reading ten short stories a week, writing a strong first draft of one, editing an old one to bring it into better shape, and sharing some of those edited stories with friends and family who can provide some solid feedback.

Zelda can set her microgoals by simply making a detailed gardening calendar and sticking to it. Each milestone of planting, watering, weeding, and harvesting is a small goal in itself.

Andy has ready-made microgoals with his automated savings plan, but he could push himself harder by making microgoals of finding additional ways to save a certain amount each month – say, $100. This encourages him to focus on clever ways of saving money and living a bit more frugally.

Connie should make it her goal to run through her complete set list in front of at least one audience member each week, then gather feedback when she can. She should also devote at least a bit of time each day to practicing those songs and developing new ones, with a goal of a certain amount of practice and song development each week.

What are your little steps? What can you do each day to move you closer to that big dream, now that you have a nice start? It only takes a little step to get further along on your journey, after all.

Set Aside the Time
Many people tend to fall behind on such big goals because they can’t seem to find the time for them. My feeling is that if this big dream really is a priority in your life, then it’s easy to find a way to free up half an hour or an hour each day to devote to that project.

For me, I’ve simply set aside half an hour each day to read a short story and half an hour to write a new one or prod an old one. I found that hour by simply getting more focused in my reading. On a normal day, I would spend two hours or so simply reading for pleasure – now I just have one hour of free reading and an hour devoted to making myself into a good fiction writer.

Zelda might find that her gardening project is well served by devoting a few hours each weekend to maintaining her garden. This can easily be found in many people’s lives.

Andy should consider doing much the same as Zelda – spending a few hours each weekend seeking out ways to reduce spending. One great way Andy could do this is by completing a few one hour projects each weekend for a few months, keeping track of what those projects actually save, then increasing his automatic savings by that amount.

Connie should just set aside practice sessions a few times a week, then devote some time on the weekend to playing a full set – perhaps on Saturday afternoon at a coffee shop or on Saturday evening at a local music establishment. One good place to harvest extra time is from entertainment sources – turn off the television, play fewer video games, or stop going out quite as much.

When will you do it? Look for places in your own life where you can free up a few hours on the weekends and/or a half an hour or an hour each day. Cut back on the television intake. Don’t go out after work as often. Reduce your involvement in some activities and friendships that aren’t really fulfilling to you. It’s easy to find that time if you want it.

A Few Final Tips
Here are a few additional little things to help you along.

Let the project provide the joy – don’t reward yourself. When you achieve a microgoal or reach a little milestone, it will feel very good. Enjoy it, but let the joy flow from the project, not from some artificial reward you give yourself. Don’t buy yourself something or do something out of the ordinary because you’ve made it this far – instead, simply revel in what you’ve accomplished to this point.

Share what you’re doing. Start a blog about it. Send emails to your friends about it. Talk about it in conversation. The more you share it, the more support you’ll get from the people around you, the more you’ll think about the progress you’re making, and the more inspired you’ll be to stick with it.

Failure should result in changing your plan, not quitting. Everyone fails on the journey to a big success. The winners are the ones that don’t use it as an excuse to quit. Instead, they use a failure as a tool – an indication that the game plan may be a bit off, that more practice is needed, or something else. When you fail, don’t blame it on the “impossibility” of the big goal. Instead, look for a different route up the mountain.

Good luck!

Carl writes in:

I am 21 years old and am still in college earning my degree. As of lately I have begun thinking about my future and what I will do with my money. I understand saving is a crucial part of living a successful financial life, but I am confused on how to attack such an issue. I have decided that I will definitely get a Roth IRA, but outside of that I don’t know what else to do with my money. I want to invest in the stock market in the long term most likely a index fund or a portfolio of low risk companies, would that be a form a saving?

I don’t if i should even bother with an online savings account and just focus on IRA and stocks, or should I have all three?

Carl’s certainly headed in the right direction. He’s clearly aware of the value of spending less than you earn and is interested in figuring out the best way to invest the difference.

However, there’s one big piece of the puzzle that’s missing here: what is Carl saving for? Without having clear goals in mind, it’s incredibly easy to make very poor choices when it comes to saving for the future.

Take the Roth IRA, for example. It’s a great vehicle for saving for retirement because, when you reach retirement age, you can take withdrawals from it without any taxes at all. However, it’s an extremely poor vehicle for saving for goals prior to retirement, since you can only withdraw your contributions.

On the other hand, savings accounts can be a great place to put cash if you intend to spend it in the near future. You don’t have the risk of losing value as you do with the stock market and you’ll earn at least a small return on your money.

Carl needs to spend some time thinking about what his goals are. Is he interested in saving for retirement (based on the Roth IRA mention, I’m guessing he is)? Is he saving for something in the short term – for example, is he considering a home purchase in the next year or two? Does he just want an emergency fund so that he can survive in the event of an inability to find a job after graduation? Or is he interested in long term investing (more than ten years or so) that he can use in his thirties or forties for a major purchase (like, say, a home to raise a family in)?

These different goals are wonderfully matched to different investment vehicles. If you want an emergency fund, you should be putting your cash in a savings account. If you want short term savings for goals in the next few years, you should look at short-term treasury notes, bonds, and certificates of deposit – stable investments that aren’t restricted and won’t lose money. If you’re shooting for long term savings (but not retirement savings), look at stock investments, preferably in index funds. If you’re saving for retirement, a Roth IRA is a great vehicle.

It’s likely that Carl is eyeing multiple goals. It’s also likely that, given his youth, that these goals are more long term in nature, but it is always useful to have an emergency fund on hand for any emergencies. I can say this much: if I were in Carl’s situation, just coming out of college with a strong desire to spend less than I earn, I would fully fund a Roth IRA, build up a few months’ worth of emergency fund, then start investing in index funds for longer-term things, like buying a home in my thirties. However, Carl’s priorities may be different.

The real challenge isn’t the actual investing. The challenge is figuring out your goals and knowing where you’re going with your life.

Roughly a year ago, I wrote an article entitled Goals and Plans for 2008 that specified the things I intended to do during this year: eliminate all of my family’s non-mortgage debt (didn’t quite make it), start an investing plan (yep), double the readership of The Simple Dollar (yep), pull the trigger on three writing projects (two out of three ain’t bad), and spend more time with my children (yep). All in all, a pretty good year.

Just like last year, I find myself looking forward to 2009, identifying the things I want to accomplish during that year. Here are the five big goals I’ve defined for the coming year.

My first goal is to eliminate my remaining student loan debt. That’s the only non-mortgage debt we still have, and it’s locked in at a percentage significantly higher than our mortgage. Thus, it’s our big financial target for the coming year.

For us to make this goal, I need to make an overpayment of roughly $1,200 each month on that debt. If I do that, the loan should be completely gone by the end of the year, leaving us with just our mortgage for debt.

My second goal is to write a manuscript for a second book. I want to write more of a “meaty” book for my next one, and I have a lot of ideas as to how to go about it. It’s going to be quite a bit of work – a different kind of work than writing 365 Ways to Live Cheap.

I intend to start this book in the spring. I find that I have more success starting big creative projects in the spring than in any other part of the year – summer is usually filled with a lot of breaks from writing to spend time with my family, fall is very routine-oriented, and winter is usually heavily in the doldrums.

My third goal is to get more involved with local politics. I am interested in running for a local political office in the near future, one that will likely eat up a sizeable slice of time on a regular basis.

I very much enjoy the process of local politics, as it often feels that the decisions you make and discussions you participate in directly affect the community around you. I look forward to the opportunity to get more involved with it.

My fourth goal is to lose a pound a week – a total of fifty two pounds. I’d like to get my weight back to what I weighed in college, which was the point in my life where I felt the healthiest.

The biggest change I’ll need to make to reach this goal is to incorporate more exercise into my life. In early January, I have a few appointments scheduled with my doctor, a dietitian, and a physical trainer to help come up with a reasonable and healthy plan for me to reach this goal.

My final goal for 2009 is to make a strong, concerted effort to let some of the most important people in my life know how important they are to me. I hope to do this in the form of letters and videos and to give these things the time and attention they truly deserve.

There are a lot of people in my life that I care for a lot and it’s often difficult to express to them how much they mean to me. By making this a priority, I hope I can find ways to let them know what they really mean to me.

What are your goals and plans for 2009? Let us know in the comments.

A few days ago, Seth Godin posted a brilliant piece on his blog entitled Is Effort a Myth? In it, Seth addresses the issue of luck:

And that’s the key to the paradox of effort: While luck may be more appealing than effort, you don’t get to choose luck. Effort, on the other hand, is totally available, all the time.

A while back, I wrote on a similar theme, arguing that luck happens to those who provide the most opportunities for luck to grow in their life, and pointing out ten things anyone can do to improve their luck.

Seth takes a bit of a different route to a similar conclusion. He argues that the people who get lucky are the people that put forth the extra effort, and he offers a four step plan for making it happen for you:

1. Delete 120 minutes a day of ’spare time’ from your life. This can include TV, reading the newspaper, commuting, wasting time in social networks and meetings. Up to you.

2. Spend the 120 minutes doing this instead:
* Exercise for thirty minutes.
* Read relevant non-fiction (trade magazines, journals, business books, blogs, etc.)
* Send three thank you notes.
* Learn new digital techniques (spreadsheet macros, Firefox shortcuts, productivity tools, graphic design, html coding)
* Volunteer.
* Blog for five minutes about something you learned.
* Give a speech once a month about something you don’t currently know a lot about.

3. Spend at least one weekend day doing absolutely nothing but being with people you love.

4. Only spend money, for one year, on things you absolutely need to get by. Save the rest, relentlessly.

All four points are valuable life lessons, but I wanted to focus in on the first two because the point there is near and dear to my heart.

If you can devote two hours a day to improving yourself and doing something to change your situation, your life will improve. Period.

All I have to do is roll back the clock two years to provide some proof of this. In October 2006, I was recovering from our financial meltdown, dreaming of a career as a writer and of owning our own home, but not really doing anything about it. I was twenty eight years old and I realized I was watching my life drift by.

So I started The Simple Dollar, and I started devoting about three hours a day to it at first. It took me a few months to find my writing legs – many of my early posts sound quite a bit different than what you’d read from me today. But I kept hammering away at it. I worked on getting better at brainstorming and quickly transforming those ideas into something readable. I learned how blogging worked. I interacted with a lot of readers and potential readers and learned what they were out there seeking.

Two years later, it’s changed my life. I’m now doing it. I’m writing full time, something I barely dreamed about two years ago.

Now, I’m left thinking about the next big thing I want to tackle. Can I pencil off two hours a day and do something big like that again? I’ve had a lot of ideas floating through my mind as of late, but Seth’s post kicked me in the rear end and got me thinking.

So, how can you do it, too?

Finding 120 Minutes
In Seth’s words:

Delete 120 minutes a day of ’spare time’ from your life. This can include TV, reading the newspaper, commuting, wasting time in social networks and meetings. Up to you.

What can you delete from your life? Don’t just blow off the question. Think about it for a minute.

I know that the single biggest thing I could delete from my life is the time I spend browsing political blogs and websites. It’s almost an obsession for me at times, and I don’t get anything out of it except for more indignant and angry. If I really wanted to be politically involved, I could spend that time campaigning for the candidate that I want – or doing something to personally improve myself.

Seth names several other options. Television is a big one for many people. I know one guy who finishes each day going out to the bars for two hours – and he doesn’t even get a drink. He just hangs out with the boys. I know another woman who spends at least three hours a day reading absolutely trashy romance novels.

It’s often the people who waste that time that wonder how come others are successful and get promotions. Are they lucky? Or are they just committed to the details.

Look around your life. Look for the things you can eliminate. If you can come up with two hours a day, you have a serious block of time to commit to success.

Using 120 Minutes
So what are you going to do with that time? Seth’s suggestions:

* Exercise for thirty minutes.
* Read relevant non-fiction (trade magazines, journals, business books, blogs, etc.)
* Send three thank you notes.
* Learn new digital techniques (spreadsheet macros, Firefox shortcuts, productivity tools, graphic design, html coding)
* Volunteer.
* Blog for five minutes about something you learned.
* Give a speech once a month about something you don’t currently know a lot about.

That’s a very good list of things, but they all assume an entrepreneurial goal. I suggest something a little bit different.

What’s your dream?

We all have one big thing we would like to change in our lives, or one big thing we’d like to accomplish. After some reflection, I’m starting to settle on my next goal, something I’d like to accomplish in 2009. I don’t want to talk about it yet, but I know what it involves.

What could you do with those two hours a day to carry you closer to that goal?

You want to improve your career? Spend two hours a day mastering basic skills related to what you do and absorbing more information. I have several friends in life sciences. One of them spends two hours every single day reading and re-reading the latest scientific papers that come out. He does this in the evening, after his lab work is done. Do you want to guess who’s slowly starting to seem like the expert on his field of research in his lab? Do you want to know who’s starting to make a name for himself at meetings?

You want to improve some aspect of your life – perhaps you’d like to lose some weight? Start walking. Seriously. Walk for an hour. If you can cover a mile in twenty minutes, you can walk three miles. Get up a little earlier and do this before work instead of sitting there dead-eyed watching the Today Show and dreading work. When you get home, instead of flopping in front of the television, put on some walking shoes and a jacket and go for a very long stroll.

You want to become a respected member of the community? Volunteer two hours a night. Offer to take tickets at high school athletic events. Go to city council meetings. Go to school board meetings. Leap at the chance to participate in things. Join a civic organization or two and get involved with them. You’ll start seeing people over and over again and eventually you’ll start to get to know a lot of them. Before long, you’ll see the rewards of that effort – when you go out in your town, tons of people will shout out hellos to you and when you need help, you’ll have tons of helping hands.

If you can find that 120 minutes and you can use it every day to make a change, you can have that dream. The only difference between you and the person actually making it is the willingness to sacrifice that time each day.

Is your dream worth giving up that hour of television?

Ramit Sethi pointed me towards a brilliant little essay entitled The Real Reason We Aren’t Homeowners. It’s surprisingly refreshing, honest, and well worth discussing a bit (in fact, their whole section on homebuying essays, The American McDream, is well worth reading).

The article gives six distinct reasons for why the writer doesn’t want to be a homeowner, each of which are worth some commentary.

We’re too poor to buy a house. Our total household income is only around $55,000 a year. We hold stringently to idea that we should never have a mortgage which is more than double our annual income. We do that because we feel being house-poor is not a good idea, and could unnecessarily tie us down.

Liquidity This is a pretty sound economic reason, and also part of the reason why we elected to purchase a more modestly priced home that was about 1.8 times our combined annual salary (at the time). Note that this does not preclude them saving for a very large down payment – if you can save up $90,000, they could then get a $110,000 mortgage and buy a $200,000 home.

There are no safe, “nice” neighborhoods in our side of town which have 3 bedroom or larger homes available for $110,000. We’re not interested in moving to outlying areas because we have a business in this neighborhood, and value our time too much to waste it commuting.

Environment They prefer to live in the general area that they currently live in, but housing prices have made home ownership in their area quite expensive – far over $110K for the home that they wish to purchase. It’s worth noting that this article was originally written in 2001 – they likely saw far higher prices by 2005 or so.

We can’t earn more than around $50-70K a year because I lack the drive to spend too much of my time and energy earning money. I have too many other interests. I’m happy with making enough to get by.

Diverse interests The author understands clearly who he is and knows that his passions don’t lie in chasing the brass ring. Instead, he follows his diversity of interests and doesn’t worry about earning more and more money. Whether that’s a good choice or a bad choice will depend on your own beliefs – my feeling is that there are different paths that are right for each person and it takes a strong person to know which path is right for him or her.

My wife doesn’t work for money by choice. She educates our children, reads lots of books, gardens, does genealogical research, cooks from scratch everyday, and gives many hours of service to a women’s organization.

Stay-at-home parenting / personal choice The stay-at-home parenting choice is one that my wife and I struggled with for a long time – and we’re somewhat doing it now, with my writing career. Again, this is a choice that has no easy answer, regardless of what either side might say about it, and it takes some fortitude to simply put your foot down and do what you truly believe is right, regardless of the other consequences.

Which brings up another point: we don’t have any spare time in our schedule for home repair, maintenance, or upgrade projects.

Time management Actually, more than time management, it’s a confession that the person has no real interest in taking care of their property. While I find that somewhat disheartening (often, someone unwilling to maintain their living quarters is often unwilling to maintain other parts of their life, too), it’s again honest and straightforward.

And finally, we lack the discipline to save for a downpayment. Every time we get $5,000 to $10,000 together, we go and blow it on another family vacation.

Lack of discipline / other desirables This isn’t so much a lack of discipline – they are able to save up to five figures – it’s a matter of finding the gratification of a family vacation to Disney World followed by a year of renting higher than a family vacation camping followed by home ownership.

The Real Reason
On paper, this individual seems suited for home ownership. There’s a steady income, a tendency to save and spend less than they earn as a normal course of events, and a family situation where housing stability might be at a premium. Yet, through some self-evaluation, the family determined that home ownership wasn’t right for them. Why?

They have different goals in life.

Their goals certainly don’t match mine. I’m very proud to be a homeowner and, since my local area never really had what I wold call much of a real estate bubble, the home will hold value. I love to camp and I don’t have much interest in expensive vacations for my family, at least not until the children are old enough to deeply appreciate it. Those two philosophies alone put me in a different camp than the author of that article.

But what’s really key to notice here is that they set goals and achieved them – they just happened to be different goals than I do (or perhaps you do). Their goals revolve around expensive family vacations and having a stay-at-home parent – and those goals have both notable benefits and drawbacks.

And they’re meeting those goals. They’re regularly spending less than they earn so that one parent can be a stay-at-home parent and so that they can go on nifty family vacations.

Their life may appear different on the surface, but the fundamentals under the hood are the same. Set goals. Spend less than you earn, and sock away the difference.

That will take you to your dreams, no matter what.