Good financial stewardship isn’t conceptually difficult. You don’t need a PhD in advanced mathematics to put together a budget. You don’t need to be a stock broker to understand how to invest and save for retirement.
If that’s true, then why do so many people struggle with their finances?
It’s because 90% of the battle is mental. For some, they can’t separate their emotions from their finances. For others, they get so overwhelmed that they just refuse to deal with money.
You can’t address financial problems without also addressing the root of the issue.
It’s like losing weight. Most people that are significantly overweight are overweight for a reason. You don’t just wake up one day and find that you gained an extra 50 pounds. There’s usually some emotional issue that was dealt with by eating. If that issue isn’t dealt with, that person will never be able to lose the weight and keep it off.
Finances are the same way. In fact, it’s a bit scary how similar fitness and finances are.
The root of most people’s financial problems are the mental roadblocks they don’t know how to overcome.
Conquering the Mental Battle
You are most likey familiar with Dave Ramsey’s baby steps. Some of the steps in his plan don’t make mathematical sense.
The point isn’t to find the most economically advantageous way to become debt free. The point is to maximize the little victories and use that emotional momentum to carry you to the goal.
I like the gazelle intensity that he talks about. It’s all about laser focus. It’s about achieving one goal at a time.
The vast majority of people are terrible multi-taskers. (Funny side-note: A study was recently done that showed most people who think they are good multi-taskers are actually wose at multi-tasking than those who say they are not good at multi-tasking.)
Multi-tasking leads to failure. You need to focus on one goal at a time.
The Tall Value Of Short Term Goals
How do you eat an elephant? One bite at a time.
Big financial goals – paying off debt, investing for retirement, saving for college – are best handled by breaking them down into smaller pieces.
Let’s say you have $30k in debt across 6 different accounts:
- Determine how much you can put towards debt reduction each month. – let’s say $500
- Divide the $30k by the $500 per month – 60 months
- Pick one debt and pay an extra $500 per month on it until it is paid off.
- Select another debt and pay an extra $500 per month on it until it is paid off.
- Continue this process for the next 60 months or so and you will be debt free.
It sounds silly to break it down that way. But most people find it much easier to focus on paying that $500 per month. Rather than being frozen not knowing how to tackle a debt load that is nearly as much as the average annual income, focus on $500 per month. $500 per month. $500 per month.
Setting Micro Goals
You can break it down even more into micro goals. These mini goals are things you can do on a weekly or daily basis to reach your short term goals.
You can say this week I’m only going to eat out one time. This week I won’t go by Starbucks. This week I’m going to clean out my pantry and put together meals with that instead of going to the store.
Today I’m going to drink water instead of getting a drink from the vending machine. Today I’m going to read the news online instead of buying a paper or a magazine. Today I’m going to go to the park instead of a movie.
Don’t get overwhelmed by goals that take most people years to accomplish. Break them down into small, easy to digest pieces. Short term goals are a sure-fire way to set yourself up for success.
Have you used short term goals in your own life? How have they helped to accomplish bigger goals?