The 5% Goals — How I Reach Larger Goals by Completing Smaller Goals

Many personal finance bloggers have a very large goal such as 2 million or 1 million and track their progress on their site. I confess that I like reading about these people’s progress, but I don’t really track my progress in that much detail. I think it would be too much information to display every single account I own on this blog. So instead, let me tell you about how I set my financial goals.

I came up with the idea of 5% goals a while back when I was measuring my monthly networth gain. Basically I set up a total of 100 networth goals, and each goal is a 5% gain over the last goal. For each goal I put a target date for me to achieve it and then I record the actual date I achieved it. I think that it really gives me discipline to save and invest and also I am competing with myself to finish my goal before my estimate. The goals get exponentially larger and thus become harder to reach so you have to adjust your estimated finish date.

I haven’t really shown anyone my goals list, but the list started at $31,500, which is 5% over my original stash of $30,000. The 100th goal is $3,945,037, which is basically 30,000 * 1.05^100, and I have an estimated completion date of December, 2027 on that last goal. However, I could finish before then because right now I finished the last goal 8 months ahead of schedule. Now my goals also include my hubby so hopefully we will finish ahead of schedule together. I like my goals system because 100 improvements of 5% is psychologically more possible than a huge number like $3,945,037. Exponential growth is a very powerful thing and successive small improvements can do more than you think.

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