Paul meets with Mary again for a game of chess. This time, Paul gives Mary a progress report and informs her about the registered letter from the IRS. Sharing his fear about the IRS letter, Mary laughs a little. She explains to Paul that she used to be an auditor for the IRS. Sensing Paul’s concern for sharing his finances with a former IRS auditor, she tells Paul that her experience will help Paul in more ways than he can realize.

As it turns out, Paul made an error on his last return and only owed a meager $431 which Mary instructs Paul to send a check for $75 dollars along with a note that Paul would send this amount each month until the bill was paid in full. The game was over and they arranges to meet again in one month.

By now, after Laying Down The First Law, Paul has two months’ worth of data to work with. Paul explains during their next meeting that he learned a lot about where his income was going but it was not solving his financial woes. Paul announces he was ready to learn the second law which Mary explains is setting targets or goals.

Mary explains now that Paul has been feeding data into the computer between his ears, his computer needs to know how to process this data. Paul needs to give the computer a means of manipulating the data to achieve the outcome. By setting a target, Paul will begin to use his computer to find a way to achieve the target.

Only you know where you stand with your finances. If you are in debt, then it is possible you will want to set your first goal to become debt-free. You may not be in debt but you are struggling to stay afloat in your financial life so it is possible you will want to set your first goal to build an emergency fund. You may be prepared for the next 12 months but you are not ready for 30 years from now which may mean you want to set a goal to build a retirement account.

Regardless of what your goals are, Paul shares a few time-tested guidelines found in the book The Game of Work for setting your goal.

1. Goals must be written.
2. Goals must be your own.
3. Goals must be positive.
4. Goals must be measurable and specific.
5. Goals must be stated in the most visible terms available.
6. Goals must contain a deadline.
7. Goals must contain a personality change.
8. Goals work better if they contain benefits and rewards.
9. Goals must be realistic and obtainable.

All of these are fairly self-explanatory. Certainly, you can keep the goals in your mind but if you do not write them down, you will not be able to reinforce both your consciousness and sub-consciousness. By writing them down and keeping it in a place you can see every day, you will be telling yourself you have a goal. You know what you want but you will have to change the way you think by thinking positive about your goals.

For example, Paul explains if you are going to think about avoiding bankruptcy by paying off your debt, the “bankruptcy” is a negative influence which you will have to change. By changing it to a positive net worth of $250,000, you will begin to think differently. Instead of worrying about how to avoid bankruptcy, you will need to begin thinking about how much your net worth is increasing each time you pay down your debts. You will now see your net worth rising which is a positive outlook.

Even if your net worth is in the negative territory, any time you pay down your debt, you are decreasing your debt and increasing your net worth. To put it into numbers, let’s say you have negative net worth of -$145,000 and you set a target to pay down $1,250 a month. In 12 months, you will have paid $15,000 dollars towards your debt. As a result, your net worth has risen from -$145,000 to -$130,000. That is a positive progress. Maybe in the next 12 months, you decide to add an extra $250 dollars each month which means you would have paid another $18,000 dollars down. 24 months from setting your goal, your net worth has risen from -$145,000 dollars to -$112,000.

Regardless of whether you are in debt or not, your goals need to be measurable and specific. For example, when you take a mortgage on your home, the terms of the mortgage is telling you how long it will take you to pay the mortgage off and how much interest you will be paying. You can modify that goal to meet your own, for example, to pay an extra $500 each month on principle (which is the value of your home). The positive result of your goal is that you will own your home free and clear sooner than later as well as free up the money that you were going to pay on interest.

Now you are starting to have a goal in mind, you are starting to see how positive your goal can be, you are starting to measure your financial growth, you are deciding on a deadline, you should dangle a carrot in front of your goal.

Think about it, if your goal was to pay off a debt by paying $2500 a month, what would you do with that $2500 a month once you no longer have debt. Yes, you should be rolling it forward towards your financial growth but now it is okay to say to yourself, I worked my butt off for this. You could take one month’s worth, $2,500 and take a vacation somewhere you have been dreaming of for years.

After all, you will still have 11 more months of $2,500 to do whatever you want, whether it is to invest for retirement, for additional income, etc… The opportunities is endless. For now, dangle that carrot in front of you.

Mary reminds Paul,

…the amount of time you spend worrying about money is in reverse proportion to how well you manage your money.

In other words, stop worrying and find a way to make it happen because that “way” will lead you to happiness.

Tell me, what are your top 6 goals?

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