I see many people who set big financial goals for themselves. Get out of debt. Save up six months worth of expenses. Pay cash for a car. Save up a twenty-percent down payment for a house. Some goals are even bigger than that. Save two million dollars for retirement. Pay cash for a house. All of these are noble goals and I applaud anyone willing to reach so high.
Unfortunately, I see a lot of these goals end in frustration. The goal is too big to be tackled in a short period of time so when months go by and there’s no sense of completion, many people get frustrated and give up. They get tired of living under restrictions or of putting so much time and energy into something that never seems to get anywhere. I can relate. I’ve set the same goals before and while it’s all worked out now, there were times where I wanted to throw up my hands and stop bothering with the whole thing.
There is one thing that my ups and downs taught me, though, and that’s that it’s much easier to think of personal finance goals as daily goals rather than as goals that will take months or years to achieve. Sure, you’re shooting for the big goal of getting the house paid off in three years, or of paying off $20,000 of consumer debt in a year. Obviously (unless you hit the lottery) you’re not going to accomplish these things next week. And it can get frustrating and tiresome to be constantly working toward something that seems so far off. It’s tempting to fall off the wagon. “Well, what does this $100 sweater matter, anyway? It’s not like $100 will make a difference tomorrow. We’ll still need eight months to pay off our debt,” is an example of what I hear people say when they get overwhelmed by a big financial goal. I encourage them to instead think in terms of today and not six months from now.
What does this mean in practice? It means that you forget the big number that you’re shooting for, or that you at least put it in the back of your mind. Don’t think, “Oh, I have to pay off $20,000.” If you want to pay off $20,000 in a year, break that down into daily amounts. Twenty-thousand dollars divided by 365 days in a year is roughly $50 per day (not counting interest, but let’s keep this simple). Change your thinking to, “I need to come up with $50 today.” It’s much easier to think about how that is possible than it is to think about $20,000.
It’s also much easier to do. You can brown bag your lunch and save $10. You can skip the coffee and vending machines and save $5. You can use coupons at the grocery store and knock $10 off the bill. You can sell a couple of DVD’s to a place like Secondspin.com and get $10. You can make the kids eat at home instead of stopping at McDonald’s on the way to soccer practice and save another $10. Refuse to buy the crap the neighbor kid is peddling for school and you’ve saved another $15, making your $50 for the day. If you have a spouse and he/she is saving too, your daily savings rate goes up.
Of course you won’t be able to make your daily goal every single day. But some days you’ll save significantly more, like the day you cancel the cable and save $100/month. That’s an extra $3.33 per day added to your daily total every month. If you have a big garage sale and make $200, that’s $6.67 per day for that month. If you have $100 from your paycheck direct deposited into a savings account, that’s $3.33 per day in seed money every month. Your good savings days will average out your lower days and if you have a daily numerical goal in mind each day, it’s far easier to keep focused.
To keep you on the good path, keep a piece of paper in the car or your purse and write down the savings as you go through the so you can see the daily tally. It provides inspiration to keep saving and cutting to make that goal. List the seed money you start out with each day from cancelled services, big sales, bonuses or “found money,” and automatic savings deposits and then add anything new you save that day. Chances are, at the end of the day you’ll have your total.
Even if your goal doesn’t involve dollars and cents, the daily approach can help. If you want to get your finances organized, plan for retirement, or simply learn more about money, think of what you can do daily to move the goal forward. If organization is your goal, one day you can research software packages. Another day you can go through your papers and keep/toss as appropriate. Another day you can go see a lawyer and get your will drawn up. If you want to learn more about money, one day you can go to the library and check out books. Each day you can read one chapter. And on it goes. It’s easier to succeed if you tell yourself, “Today I’ll learn one new thing,” or, “Today I install a software package,” than it is to say, “I’ll get organized and educated.”
Big goals are great to have, but they don’t lend themselves to success very often, at least not in a timeframe quick enough for most of us. Big goals tend to overwhelm and frustrate us making it likely that we’ll quit. Big goals are achievable, but you can make it easier on yourself by tricking your brain into thinking that the goal isn’t really that big.