How Setting Small Financial Goals Can Pay Off Big
Having large goals can be quite intimidating. Not only is it hard work, but life is going to be testing your strength the entire way. It can become so tempting to give up and go home. You have this enormous goal in mind but the process of getting there either seems too intimidating or just not possible.
Simple Principles- What About Bob
The answer to this dilemma came to me as me and my father were reminiscing over one of our favorite classic movies “What About Bob”. This film stars one the best comedic actors of the 90’s, Bill Murray. In the movie, Bob Wiley (Bill Murray) is struggling to deal with the world around him. He has a handful of personality disorders, such things as extreme anxiety and germaphobia. Thus making it extremely difficult to do everyday activities such as getting on an elevator.
So, what does Bob do? He goes to see a therapist for help… Dr Leo Marvin. Dr Marvin had just written a book called “Baby Steps”. The therapist explains to Bob that viewing his frightening everyday tasks as one is not the way to approach it. He needs to take… (yep, you guessed it) Baby Steps! Instead of thinking about how overwhelming it will be to go outside and get home, only focus on first getting out of the office. Next, getting on the elevator, and so on.
In the movie, the book is referring to taking baby steps towards our large life goals. It seems so simple. Yet, this theory is often overlooked by many because of its simplicity. If we think to ourselves “I wish I had a million dollars in my bank account”. That does not seem real. But what if I told you that if you put away $273.97 every day for the next 10 years you would have made your wish come true. This theory can be applied to any large goals: weight loss, financial savings, or even a new career. Whatever it may be. By taking small steps towards your goals every day, the end result will not appear so intimidating. So I ask you, have you taken your baby steps today?
Smart Short-Term Financial Goals
- Build Up Your Emergency Fund
- The general rule of thumb is that you should have three to six months of your fixed expenses saved in an account that you don’t touch. To get there, figure out a small amount of money that you can stow away now and over time, that account will grow to build that buffer you need. Which leads me to our next point..
- Track Your Spending
- Not sure where all of your money goes every month? Finding yourself swiping your card hoping there’s enough in there for the payment to go through? There are so many free apps out there that can break down what percent of your income goes to fixed expenses vs discretionary. Setting this up can be a real eye opener!
- Contribute to a Retirement Account
- Most employer’s offer them, but if not open yourself an IRA! These accounts offer tax advantages for you now or in the future and can be automated so you don’t even think about the contribution. Retirement is definitely a long term, not a short term goal, but the power of compounding is a lot larger than people think. Start as early as you can, set it, forget it, and watch your money grow!
- Review Your Insurance
- Car, renter’s, life, health- the insurance world can be complicated and overwhelming. Some of these items are just commodities and often can be optimized yearly to get you the best deal/benefit for your situation. Don’t leave money on the table!
How to Set Financial Goals
- Write it down to make it real.
- Buy a journal, open the Notes app on your phone or a document on your computer and memorialize your goals. Look at it often!
- Get an accountability partner.
- Now as financial advisors, our suggestion would be to find a professional to guide you along the way. But if you’re not ready for that step, ask a friend or family member to check in with you to see if you’ve been doing what you say you would.
- Use technology to your advantage.
- Set up auto-withdrawals/deposits into your savings accounts, investment accounts, etc. so it happens automatically without you initiating it. It makes your plan fool-proof!