I set the same financial goal every year, to save 30% of my income, and I achieve it each time by following 3 steps

By Kali Roberge

Every year, goal-planning and intention-setting content floods my social media feeds. Friends show off their shiny, new planners for the new year. Acquaintances post their annual theme, usually a one-word concept like "Clarity," "Focus," or "Joy." 

As for me? I really like the idea of setting resolutions. But historically, I avoid setting specific and concrete goals. This is not my finest characteristic, but I know the truth: I'm afraid of failure, and it didn't take me long to work out that if I didn't have a specific goal, there was nothing for me to fail at.

In my own defense, I tend to focus more on habits than goals (like "do yoga daily" or "write a new essay once a week"). I'm also intrinsically motivated enough to be an objectively high achiever, even without the SMART goals to cross off my list.

I just buck at the idea of the structure and confrontation of did-you-or-didn't-you-do-this, I suppose.

Even with all of this, however, there is one financial goal that I set every year, no matter what: to contribute at least 30% of my gross household income to long-term savings and investments.

My non-negotiable financial goal to save 30% of my income

While I do try to focus on other financial accomplishmentseach year, saving 30% of our income is always priority No. 1 for my husband and me.

This focus is part of what makes such an ambitious goal easier to achieve: we have a clear objective. There may be other things we want or need to do with our money in a given year, but those things must fit around this top-ranked savings goal.

For us, we target this percentage of our gross income (although you could make an argument for setting a savings goal based on net pay, too). 

"Long-term savings and investments" means money intended for use in 10 or more years. We  contribute to a variety of accounts throughout the year, including 401(k)s, IRAs, HSAs, and brokerages, to meet this goal. The total amount of contributions must equal 30% of what we made in the year.

Why we set this savings goal each year

Considering most financial experts suggest that saving anywhere from 10% to 20% of your income is adequate, asking why on earth we save 30% (and sometimes even more, which we discuss on this episode of our podcast) is a reasonable question.

The answer is because that's what we need to do to achieve our specific financial plan.

Based on the financial planning we've done, we determined that saving at least 30% of our income is what needed to happen in order to achieve our goals, which include:

  • Building wealth and assets. Neither my husband nor I come from independently wealthy families and cannot rely on financial support or an inheritance now or in the future to support our needs
  • Retiring earlier than our 60s. While extreme early retirement doesn't interest us, we'd like to get to a point where work is optional in our 40s and 50s
  • Enjoying the flexibility to use our money freely in the future for things that we may want to pursue
  • Having enough money saved so that even if our plan doesn't go according to plan, we'll be OK

Those last two points are highly underrated when it comes to setting financial goals. Right now, we don't have anything specific we want to buy. But we save anyway. You don't need to have a concrete thing or purchase or purpose in mind to make saving more money a good idea.

And while we have a plan, we also know that things simply don't go in your favor all the time. Despite best intentions, great decisions, and plenty of skill, there's still room in life for chance. 

Sometimes, chance works in your favor. That's called luck. But other times, things fall apart, the unexpected happens, or we realize the downside of an opportunity and things don't work out. That's risk, and it's costly if you can't afford it.

We always want the financial power to be able to manage bad luck or the realization of risk, and that means having the ability to bounce back even after a bad break. Saving 30% of our income each year is what we feel we need to maintain that ability.

How we save 30% of our income

We start by getting clear on our values

Setting priorities and getting clear on what's most important are a big part of how we save so much money every year. 

Without that clarity, I'd find it almost impossible to make the commitment necessary to transfer big chunks of money to savings or investments when I could spend it on other things that seem more appealing in the moment.

We set up automatic deductions to save before we ever see the money

The order of operations in how we manage our cash flow is a big part of our strategy. For us, putting our savings first is key to achieving our financial goals. When you put your savings first, you give yourself a constraint to work within when it comes to spending — but I'd much rather use that framework than spend what I want first and then try to figure out how I'm going to save later. 

Given that, the first thing that happens to our money, even before we get paid, is automatic deductions from our paychecks. A certain percentage of our regular pay goes straight into retirement accounts. We never see this hit our bank account, so using it for anything but a contribution to the long-term savings goal just isn't an option.

We fund our other savings and investment accounts right after we get paid

Once we do get paid, we immediately fund other accounts (like our brokerage account) with the necessary amounts to get us to our goal by year-end. Only after this is done do we look at what's left, which must be distributed among fixed expenses, discretionary spending, and other savings goals.

This approach isn't for everyone, but it's the one financial goal I set every year and work to accomplish. It's been a useful tool in allowing me to reach even greater financial goals, like progress toward financial independence and growing my wealth along the way.

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