frugal underground

I read somewhere (I think in the Early to Rise newsletter, which I heartily recommend despite the myriad ads) that it’s a good idea to write down your personal (or household) revenue targets for the next 7 years. I don’t remember the specific logic, but I imagine it follows the standard pattern: goals that are written down are more likely to be acheived; if you don’t know what you’re shooting for, you won’t know whether you’re hitting it; if you fail to plan, you plan to fail. Okay, yes, I’m slightly mocking, but that’s not to say I don’t believe in it. I’ve had the item “Figure out revenue targets for next 7 years” sitting on my to-do list for an embarrassingly long time, because it seemed daunting. I just did it in 5 minutes (which makes the to-do list residency even more ridiculous).

My revenue targets
2006: $20k
2007: $28k
2008: $39k
2009: $55k
2010: $77k
2011: $108k
2012: $150k

My logic
Some advice that I know came from Early to Rise regarding goal setting is this:

Make your goal specific. If possible, make it quantifiable.
Make your goal realistic. Then cut it in half.
Break it down into pieces.
Establish a timeline.
Allow room for setbacks and distractions.
Identify your support team.
Seek a mentor.
Make your goal (at least a little) public.
Establish a way to reward yourself at the end and on the way.

My first years are pretty conservative. This is for two reasons: first, I’ve only been full-time in business for myself since October. It’s kind of feast-or-famine at the moment, and realistically, it’ll probably be that way for a while. I am trying to establish multiple streams of income and make at least some of them passive, but until they’re really firmly planted, that means a fair amount of time up front, without a lot of money. I’m also trying to be realistic, a la the ETR advice, by cutting in half the amount I think I could make if I work hard.

This year’s amount is also not a matter of whim. I hold back half of what I make to cover taxes, social security, etc. (it’s a little excessive, perhaps, but I don’t like nasty surprises come tax time; besides, it’s in an Emigrant Direct account). $20k is slightly more than $1400 gross income each month. We’ve figured out that if I can consistently contribute $700/month towards the mortgage, we’ll meet our goal of paying off the house by my 30th birthday. So I’m figuring about $800/month post tax, most of which will go to debt.

For the rate of increase, I’m figuring about 40% revenue increase a year. I’m not sure if that’s overly optimistic but I think it’s reasonable, particularly considering the intentional investment of time now to make money later.

I haven’t taken all of the ETR advice yet, but I’ve just accomplished another piece: making it public.

Consider doing this exercise yourself (if you post it on a blog, by all means, trackback or leave a comment linking to your post).

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