Setting a Realistic Timeline
I conducted a webinar today on "Building a Financial Strategy." As part of the session, we reviewed our step-by-step approach to achieving your financial goals (it’s called The 7-Tank System). At the end of the session, one participant simply asked the following, “How long does it take?”
I love that question! It cuts to the core of what we all want to know. If you’re given a map and a destination, the most obvious question is "how long will it take me to get there?” Time has the most variability and causes the most stress.
Let me provide a few perspectives on her question.
- 3 timelines matter: 1) Building a small 1 month emergency fund, 2) paying off bad debt, 3) increasing your emergency fund to 3-6 months. After that, it’s all about aggressively saving for retirement.
- How much you save each month dictates how long it will take: If you need to build a $2,000 emergency fund and can contribute $500/month, it will take 4 months. Get to $700/month, it will be 3 months. Slip to $300/month and it will take over 6 months. You’re in control.
- The answer is 3-5 years: It may sound crazy but I’ve seen a ton of financial situations and the answer is almost always 3-5 years to pay off bad debt and build a full emergency fund. Make sure you set realistic expectations.
- Time flies: The multi-year timeline can be discouraging but we all know time flies. Focus on making progress each day.
I’m glad the participant asked the question that everyone was thinking. Setting a realistic timeline is important to staying on track. Fortunately, you’re in complete control of your timeline – in the world of personal finance, there are no speed limits.
What do you think about setting a timeline? Which other financial timelines are important?