Planning and patience

Just thought I'd share an annecdote from a conversation I had with a friend a couple of months back.

We were talking about his new house he was having built on the outskirts of Sydney, and I was discussing my plans (in broad terms) over the next 2-5 years (such as buying a house once I've done X, new car after I've achieved Y, new camera after Z).

My friend shook his head and told me how scary it was that I had everything planned so carefully and so far into the future. Out of most of my friends, this guy was probably the most sensible with his money (not extravagant, but not really an investor beyond his PPOR).

It struck me how difficult it was for many people to conceive a plan or goals and work towards them.

Another friend on the weekend who has just bought a new digital camera couldn't understand why I would wait over 12 months before purchasing (I originally discussed my planned purchase with him 6 months ago, and I won't be buying for another 6 months or so). He knows I've got enough money to buy it any time (budget is close to $5K), but he couldn't really understand why I would wait.

They may think I'm very patient ... but unlike them, there's no way I could wait another 30 years or so to "retire" ... I want it now!

 

There's a number of reasons, some of which you've touched on ...

1. I do spend quite a bit of money on "tools" (ie computer equipment), so I do need to control my spending. I'm careful to differentiate between items that will improve my productivity or simplify my life, versus things that aren't really necessary, but are nice to have.

I tend to just buy computer equipment when I need it (since I spend up to 18 hours a day using it) - but I buy carefully researched quality items that will actually add value to my working day and will continue to work well for a good lenght of time, so I'm generally not frivolous (although my wife may disagree!).

Items like cameras, my digital piano, and other such expensive items, aren't really necessary, and if I just bought them when I felt like it, I would never have any money. It's about balancing needs versus wants versus long term goals.

2. I prefer not to rush into large purchases like this - I always regret hastily made decisions, I tend to thoroughly research what I'm about to buy so that I know exactly what it is I want/need and have a good appreciation for whether the purchase will meet my goals. My friends joke about coming to me for purchasing advice, since they know I would have most likely done the the research

3. I was quite happy to buy the current model camera, but rumour has it that there's a new and better model coming around the time of my birthday, so I figure that's another good reason to wait. It's a matter of balancing waiting for the better model versus being happy with what's on the market now. I'm not generally inclined to wait for a newer model, unless it happens to fit withing my purchase timeframes anyway.

4. I generally time purchases like this to events like my birthday - for no real better reason than it's a good target. Making myself wait and limiting how much I can buy each year is good discipline I find.

If I bought everything I wanted now, I would never have any money.

For items such as the camera, I also like to tie it to other major events, such as a lengthy trip OS we've been planning for a couple of years - I'll buy the camera a couple of months before we go, and include the cost in our overall trip budget.

I did a similar thing when we bought our first house - I had wanted to purchase a nice BBQ and a stereo system, but I waited until after we'd successfully bought our house. It took 18 months to find the right house - by which time we had saved more than we ended up needing for the deposit and expenses, so we were easily able to afford a very nice BBQ and a good quality stereo system (which is still working extremely well today, nearly 7 years later).

I also find that if I wait before purchasing, and perhaps even tie my purchase to meeting a goal, then I can justify spending more than I perhaps would have otherwise.

I have some specific financial goals I'm hoping to meet by the end of next year, at which time I'll buy a new car, which I'll probably spend over $75K on (current car is 13 years old and cost $19K when we bought it new). I can't generally justify spending $75K on a car, but if I tie it to meeting a rather large goal, it both makes it much sweeter as a reward, and also quite a lot less stressful (I may well pay cash for it !!)

 

Indeed, my goals have changed along the way - indeed, several major lifestyle goals I was working towards have been significantly modified in recent months due to a slight change in focus.

This is one reason I always strive for flexibility in what I do - locking myself into a long term strategy based on a goal set years in the past is not an ideal situation. I need to be able to change direction with the changes that happen in my life.

Goal setting is still very important I feel - but so is the realisation that it is okay to change your goals ... provided that you don't change them on a weekly basis based on each new whim!!

For this reason I find that it can be more constructive to set long term goals along the lines of who you will be, what types of things you will be doing, and what you will have achieved. Not along the lines of what you will be worth and what you will own.

"In X years time I want to be a person who is ... "
"In Y years time I want to be doing ... "
"In Z years time I want to have done ... "

These are much more flexible goals and define YOU rather than your bank balance. You then just need to work out what financial backing you will need to be able to achieve these things.

The shorter term goals I mentioned in previous posts are just about enjoying the journey more - they aren't the end game themselves.

 

That's exactly the what I have found too!

This works well for me:
- set a mutual goal with your family (or spouse/partner/etc)
- goal should be something you all agree on and commit to
- write that goal down so it's not just something that sits in your head
- work out what you will need to do achieve that goal - quantify it and be specific
- work out a plan for how you will build up to that goal - set interim goals and targets
- put dates and timeframes on things, especially interim goals
- set high but realistic goals - aim to stretch yourselves, but don't set yourselves up for failure
- review regularly and don't be afraid to adjust as situation changes
- celebrate wins along the way (very important !!)

One of the most effective ways of achieving a large and difficult goal is to break it down into a series of smaller goals - and to reward yourselves once you reach them. It's easy to become disillusioned when your goals seem so far away and unreachable, so it's important to actually feel like you are making progress by achieving smaller goals along the way - and enjoying the fruits of your labour !!