5 Ways to Start Saving for Your Dream TODAY
I was talking to a friend last week, and the topic of where we picture ourselves someday came up. She mentioned that she’d love to live on a beach, in a hammock, drink in hand, with a cabana boy fanning her with palm leaves. My response was, “That sounds amazing. What are you doing today to work towards that goal?” She looked at me like I was crazy. She never considered that she could live her dream.
A co-worker was discussing a charity she donates her time to, helping refugees obtain cribs, diapers, and formula for their infants when they come to our country. She mentioned one day she’d love to do humanitarian work full time. Her eyes lit up when she talked about it, and I could tell that this dream really inspired her. Again, the question is – what are you doing today to work towards that goal?
What’s your big dream? What inspires you? Where would you like to be 5 or 10 years from now? This post discusses 5 immediate steps you can take to start saving for your dream.
1) Document your goals.
Write them down! What is your dream? It could be living on a farm, humanitarian work in a 3rd world country, sailing an ocean, or anything that excites YOU. Visualize yourself in 5 to 10 years. What would like to spend every day doing, if you could do ANYTHING? Write down your ultimate dream and then start thinking creatively about what this goal might cost, and what sacrifices you are willing to make to reach it.
When you achieve your goal, there are probably some things you’re paying for in your current lifestyle that will no longer be necessary in your new. Consider cutting those costs sooner rather than later. Living on a farm, you’ll probably forgo the morning Starbucks and gym membership. Sailing an ocean, you won’t have much space on the boat. Think about downsizing your space now, and minimizing your belongings.
We stopped acquiring stuff that won’t be necessary on the boat. We focus on the bare necessities for taking care of the babies between now and then. The excess money we have goes into the sailboat fund.
Start thinking about how you can build your dream fund today.
Maybe you aren’t sure what your dream is. Try out this article from Entreprenuer.com titled, How to Find Your Passion in 5 Creativity Steps. Another idea is to create a dream board. On this board you glue or tack images that inspire you. Ask yourself what you would do with your time if money were not an option. What do you wish you had more time for in your life? What have you always wanted to do but never had the time, resources, or courage? Write your own obituary – what would you like it to say about you when you’re gone? Be creative!
Christie Inge’s blog has a great post on how to create a “Vision Board” that will help define your dreams.
2) Create a Budget
Sit down with pencil and paper, Google sheets, or preferrably Excel if you have it. How I create my budget: Expense categories are listed vertically, with monthly bills at the top. Mortgage payment, utilities, any loan payments, etc. Next are costs like food, clothing, supplies, other. Then I list what I’m transferring out of my account on pay date to my brokerage account. Although its at the bottom, this is the first thing I do every pay date. What’s left over rolls to the next paydate as a beginning balance. As I incur expenses throughout the 2 week period, I update the budget numbers with actuals. When the 2 weeks are over, my ending balance in the account matches my spreadsheet. I then adjust the next pay period budget accordingly.
I keep my budget super simple so I can focus on areas where I can make an impact by not spending. When a pay period is over, I color the background gray. The live pay period budget background is yellow, and future pay periods are white. Future pay periods are projected out for 3 years, when I hope we will have reached our goal. I adjust projections as I go. Nothing is set in stone.
On my worksheet, revenue is my Net Pay (what actually hits my bank account). It does not include contributions to HSA or 401k, as these are tracked separately.
The act of tracking expenses creates a huge amount of awareness of what you’re spending and how you can reduce it. It also keeps you actively focused on your goals by spending time updating your expenses regularly.
You can plan for deposits into your brokerage account to be deducted before you spend a penny on living expenses or extras.
3) Open a brokerage account and make a deposit.
Open a brokerage account and commit a chunk of your next check – make the transfer on pay day. You want to build wealth that you can use at your own convenience – not subject to penalties by the IRS. So this money is not for 401k contributions, but for your personal wealth NOW.
I use Tastyworks for most of my trading (with the exception of Mutual Funds). Their fee schedule is crazy cheap, they offer a visual platform unavailable at any other brokerage, and I follow the trades they publish for free. I get great ideas from them. I trade both stocks and options, but prefer options. If you’d like a brief overview of how I trade options, check out this post on How I Trade Options.
Commit to making a transfer to your brokerage account every pay day.
4) Track your net worth.
You need to be aware of your current financial status, and track future progress. I use Personal Capital, a totally free app that gives me an immediate snapshot at any given moment of my net worth. It also provides simple charts that show how I’m progressing over time.
Don’t forget to add your house as an asset, along with your mortgage as a liability. The Personal Capital app will pull your Zestimate from Zillow and use that as the market value of your home. The difference between the market value and your mortgage balance is the value of your home equity.
5) Learn how to trade for FREE.
Watch Step Up to Options on tastytrade. This series, which is archived on the tastytrade site, will teach you how to trade options starting from zero. Its offered for free. I learned how to trade from watching tastytrade, and never spent a penny on it.
Or, if you aren’t interested in trading, pick up a side hustle that works for you. There are a thousand side hustles you could consider, from photographing weddings to driving an Uber car. Just use your imagination. All earnings from your investments and side hustle should be reinvested or go towards your net worth in some way. Either pay off debt, or retain the earnings in your brokerage account.
Other ideas? Please comment and share below what steps you are taking to achieve your dreams!