Setting goals effectively will transform your life

Two contradictory strategies for success

When it comes to setting goals there are two excellent strategies, and I think both of them are extremely valuable.

Which is kind of counterintuitive, because they are exact opposites.

But they both work.

Two effective ways to use goals to help you get what you want

The first strategy is to set very small, achievable goals. They are almost effortless, so it is easy to do them and get the satisfaction and momentum that comes from success.

This kind of goals help you get started, and create habits.

James Clear writes about this kind of goal in his book Atomic Habits.

The second strategy is to set ambitious, intimidating goals. Goals that seem impossible.

This kind of goals help you push yourself further than you thought was possible.

They are what Bill Gates was talking about when he said “most people overestimate what they can do in one year and underestimate what they can do in ten years“.

Setting goals when you are starting out

When you first start thinking about personal finance, it seems overwhelming. There is too much to learn, and too many things that you need to do.

In that situation, most people find it easiest to make a list of small tasks/goals, and slowly work their way through it. Something like:

• open a second bank account for an emergency fund
• start saving 5,000 yen a month into that account
• open a broker account (including NISA and maybe iDeCo)
• start investing a small monthly amount into a diversified mutual fund
• figure out what insurance is needed
• check out prices at kakaku.com
• track spending for 2-3 months to see if there are any areas that can be optimised
• make a budget to make sure money is going to the right things

If you tried to do all of that at once you would likely be overwhelmed and give up.

But by doing each item in turn, you’ll be able to get through the list easily in a few months.

*If you would like to learn more about personal finance in Japan, please check out our video course Stop worrying about money in Japan

Setting goals when you are making progress

Once you have the basics sorted out, you might find it useful to make some bigger goals.

A good starting goal is to save up three months’ worth of living expenses (rent/food/utilities/bills) for your emergency fund. Track your progress each month and you might find yourself motivated to throw extra money in there from time to time.

You’ll be amazed how quickly you get there.

Next up might be investing your way to a significant amount of money.

*if you are serious about this goal you might be interested in our course Your First Ten Million Yen

For many people the ultimate goal is financial independence. You can calculate how much money you will need for this by using a simple rule of thumb.

First figure out how much you will need to spend per year (don’t worry about being too precise with this, a rough idea is fine). Then multiply this amound by 25 to calculate how much you will need in investments.

If you can live on 3 million yen a year, you need something like 75 million yen invested.

4 million yen requires 100 million, and 5 million 125 million.

This really does seem impossible, but my wife and I reached our financial independence goal in less than fifteen years (I had expected it to take much longer).

If you set the goal and come up short, you will still have made (a huge amount of) progress. And you just might find yourself hitting it.

My next goal is to reach 1 billion yen in net worth. I don’t know if I will get there, and it doesn’t really matter if we do, but it will be interesting to try.

What goals do you have? Are you still getting started or are you ready to set an intimidating goal?

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