So how do you break down goals into achievable steps? I like to do this by breaking them into “bites.” You wouldn’t try to eat an entire meal at one time. Instead, you would eat it by taking bites of food. You should take a similar approach to your financial goals and goals in general.
Previously, I worked as a project manager and managed projects consisting of long term implementations. I found out early that focusing clients into small manageable tasks, i.e. “bites,” helped to improve the flow of the project. Providing too much information or too large of tasks would overwhelm the client. When that occurred we would lose traction on the project.
Much like a long term project, our life becomes bogged down if we focus on too large of a task at once. Instead, we need to break them down into smaller goals which will allow us to maintain our focus. So how do we apply this to our personal finances?
Establish your Goals
Before we can begin breaking down our goal, we need to make sure that we are setting the right goals. We need make sure that we are establishing challenging, yet achievable goals. To do this, we need to make sure that we are setting S.M.A.R.T. goals. If you haven’t heard of S.M.A.R.T., it stands for Specific, Manageable, Actionable, Relevant, and Time-bound. Once you have set a goal set, we can look to break them down into the manageable bites that we discussed.
Taking Bites out of your Budget
There are a couple of ways that we can accomplish taking bites out of our budget. One of the biggest ways to accomplish this is by breaking your month down into weekly periods. Review your expenses for the week – are you on track or did you overspend in a category? By breaking it into weeks, it is easy to adjust and change course before your spending gets away from you. I often hear that people only review their budget twice, when they create it and at the end of the month. If you only review at the end of the month, you’re counting on your mental accounting which is usually wrong.
Another area I have found helpful is taking bites out of lowering your expenses. There is low hanging fruit that you can get rid of right away, but once you have taken care of the easy cuts, it can become more difficult to cut costs. I have found that having a monthly focus allows you to cut expenses more efficiently. As an example, for one month take the time to focus on lowering your grocery bill, which we have previously covered. The next month you can focus on miscellaneous expenditures. This focus on one area will allow you to get a better handle on your expenses and your budget as a whole.
Building your Savings
Trying to reach a savings goal can be a daunting task. Again, this is a place where we can see a benefit from breaking our goals into bites. If your goal is to save $2,000 focus on reaching $500, than $1000, and finally $2000. By breaking it down into manageable bites, it allows us to see our progress. Also be sure to reward yourself for reaching each step in the process. This helps to reinforce in the mind that it is a worthwhile endeavor by applying a positive emotion with the achievement.
Paying off Debt
We have covered paying off debt using the debt snowball in a previous post. I wanted to expand on it more here. For us, paying off debt was the hardest part of our financial rehabilitation. Debts are typically higher totals, so realistically you aren’t looking at a 3 to 6 month commitment. Instead you are looking at a year or longer, which is much more difficult to stick to. To be able to get through this process, you have to be able to celebrate the small wins and focus on the smaller goals. If you have a debt of $10,000, focus on paying it off in increments. Celebrate every time you pay off $1,000! Recognize that you have made a significant dent in your debt.
Break Down Goals for General Use
I have talked about using this process for budgets, savings, and paying off debts, but I also wanted to mention that you can use this process in your everyday life. We do this all the time. Anytime we have a far reaching goal, we try to break it down into small manageable steps. A critical part of this process is making sure that you have focus.
Most of us have 15 – 20 goals that we want to accomplish. That means that you are spreading your time over all of those different goals. Instead, choose your top 3 goals (again taking bites) and focus solely on those. That focus allows you to set S.M.A.R.T. goals, which then allows you to break your goals into smaller increments or bites. If you want to be able to retire early, break down your goals into yearly steps and focus on achieving that goal each year and reassess before you start the next year. Before you take any action you should always ask, “Is this helping us reach one of our three goals?” You will be amazed by what you are able to accomplish when you have this focus!