Breaking Down A Goal Into Micro-Goals

I’m a big fan of creating personal finance goals.  I like to create a goal and then break that goal down into manageable micro-goals.  As an example, let’s say that I wanted to save $12,000 (a rather large sum of money) next year.  My initial goal would look like this:

In 2008 I will save $12,000.

I don’t know about you, but saving $12,000 sounds like a pretty big deal to me.  Emotionally, we cannot help but “react” to a big number like $12,000.  You might even say to me, “NCN, I’m BARELY making it, how in the world do you expect me to save $12,000 in a single year?  That’s crazy!”  And, until about 2 years ago, I would have heartily agreed with you.  I would have joined the chorus of people who were “barely making it,” living paycheck-to-paycheck.  But, I found a “secret” way of tricking my “emotions” so that I am PSYCHOLOGICALLY motivated to save money.  In fact, I have found that saving money is simple once you get the hang of it.  Instead of trying to save $12,000 in one year, I try to save $250 per week for 48 weeks.  Now, mathematically, these goals are “equal” but emotionally (psychologically) these goals are worlds apart.  Why?  I have no idea, other than the fact that I can “wrap my mind around” the idea of saving $250 dollars.

Now, let’s take this one step further.  I divide $250 by 5 and create my micro-goal.  My new goal would look like this:

I want to save $50 per day, 5 days a week, for 48 weeks.

See how that works?  I’ve broken down my original goal ($12,000) into a manageable goal ($250 a week) and then into a micro-goal ($50 a day).  As I go through my day, I’m always thinking “How can I save money TODAY, how can I cut costs TODAY, how can I save $50 TODAY?”  My goal has gone from the “abstract” to the “practical”.  The total amount is the same but the thought process is COMPLETELY different.

(This technique works with almost any goal.  Personally, I’m trying to save $48,000 this year.  You may be in the position to save $6000 or $600, depending on your income, family obligations, etc.  The amounts might vary, but the technique is the same.)

Now that I have my micro-goal ($50 per day) I have to figure out ways to actually save $50 per day.  I’ve written several posts about how to save money including:

Saving Money On Groceries and 10 Things That I Do To Save Money.

As for actually depositing the money into my savings account, I schedule weekly withdrawals from my primary checking to my ING Direct savings account.  In stead of spacing my withdrawals out a month at a time, I schedule them weekly.  This helps to keep me accountable and focused on my daily and weekly goals.