These days, when people think about their goals for the future, those goals increasingly tend to revolve around financial aspirations of one type or another.
In particular, it is now very common for people to aspire to the dream of “FIRE” – or Financial Independence, Retire Early – which typically emphasises higher earning in the 20s and 30s, combined with a frugal lifestyle that will allow for the individual in question to retire and live their dream early. Often, that dream will involve something like a life of travel, or homesteading.
Then again, there are resources such as this page that can also help high earners to save effectively for particular goals in the future.
In any case, here are a few important things to consider whenever you find yourself thinking about your financial future.
What standard of life would you honestly be happy with after retirement?
It might be that you are aspiring to retire and on a particular amount of money, and have a romantic dream about the kind of idyllic lifestyle you want to live once leaving the world of work.
But, first and foremost, you have to be very honest with yourself about the standard of life you would be happy with when push comes to shove.
Would you genuinely be happy with living in a small cottage, or do just like the idea of it? Would regular vacations abroad be something that you’d find essential to your well-being?
Whenever you plan your financial future, begin by looking at the circumstances that you would honestly be happy with, to the best of your ability.
Will your current career or projects likely scale over time?
It’s very difficult – if not impossible – to effectively and accurately plan for your financial future, if you’re not sure of whether your current career or projects are likely to scale over time in terms of their earning potential.
In fact, in many cases, it’s also difficult to achieve future financial goals if your career or projects don’t scale in this way.
Generally speaking, you want to manoeuvre yourself so that you will tend to earn more money over time, as the years go by.
This can be very helpful in achieving financial autonomy and further financial goals.
Are there necessary future expenses which you might need to cover, but which you aren’t faced with at the moment?
It may be that you’ve come up with an excellent plan for your financial future, but that this plan is based purely on an extrapolation of your current financial circumstances, including your income and expenses.
But it’s important to think not just in terms of how you’re living today, but how you’ll be living tomorrow if everything goes according to plan.
Are there necessary future expenses which you might need to cover, which you aren’t currently accounting for? Do you want to start a family, for example? Or even just to get a dog?
It’s important to take many variables into account when planning your financial future.
