How to Reach Your Goals Using the Percentage Method

by Alexa Mason · 5 comments

You have a lot of financial goals for the new year, but you’re not sure how to go about completing them. Do you finish one before the other, or work on them simultaneously?

Like everyone else, many of my New Year’s Resolutions are personal-finance related. I’m hoping this will be the year for me to save up and invest a decent portion of money. But of course, my goals are a little more intricate than just saving and investing into one asset: I have three big investing goals that I want to conquer.

With more than one financial goal to work on, I’ve got two options: finish one before starting the other, or save for all of them simultaneously.

Normally, I’d try to finish one goal before beginning another. This is what I’ve done in the past, and it’s worked quite well. This year, however, I don’t see any one financial goal standing out to me more than the others.

With all my investing goals fighting equally for my attention, I’ve decided to use percentages to reach them.

What Is the Percentage Method?

Though I’m sure saving percentages of extra income to meet financial goals is nothing new, I first read about this method a year ago.

A couple was trying to pay off their deep debt, while developing a savings habit at the same time. They felt that by only paying off debt, they weren’t developing any new habits that would benefit them in the long term.

They put into practice saving percentages by first putting 95% of their extra income toward debt, and saving the other 5%. As they progressed toward their goals, they adjusted their percentages.

While this may not work for (or even make sense to) everyone, it worked for them. They were motivated to pay off debt — but also felt accomplished for developing a savings habit. Double win!

How I Plan to Use Percentages

In the next few months, I hope to reach more of my financial goals by using the percentage method. I want to feel like I’m making headway on several things, and for me this seems like the best way.

In 2014, I want to:

  • Flip a house/buy a rental (real estate in my area is super cheap)
  • Invest in the stock market
  • Invest in online assets

I’m already working on the third goal by building blogs and websites myself. This goal will need the least amount of money to be successful.

On the other hand, the first two goals will require a little more funding. I’m going to split all of my extra income into percentages to reach these goals. I plan to put 50% of my extra income toward real estate goals, 40% toward stock market investing, and 10% toward investing in online assets.

I love the percentage method, since it allows me to work toward all of my important goals at once.

Would this work for you? Do you finish one financial goal before moving on to the next, or work toward them simultaneously?

Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

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  • property marbella says:

    Hi Alexa,
    You are right to allocate your money in different projects and not put everything on one project, spread the risks it is called. On-line business / blog may take some time before revenue comes in, try to spread your risks on various online projects, it can pay off.

  • David @ says:

    Congrats in advance of your success Alexa. Now that you have your goals written down, you are already so much closer to accomplishing what you set out to do this year!

  • Jonathan says:

    They sound like great goals you’re working towards. I have the same goals around building blogs and websites this year, cheap to set up and relatively easy to maintain but the returns can be mixed. All the best with your rental opportunities! Happy New Year 🙂

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