I do not like distractions. When I am working on an article, I don’t want to listen to music. When I am watching television, I do not want to hear the noise of the dish washer. My mind is of the proverbial “one-track” variety. Multitasking is not for me.
When it comes to the management of our finances, I find things work best when I’m focused – intensely focused – on either one goal – or a few, very closely related goals.
For instance, let’s assume my goal is to be debt free. Well, I might have two credit card debts, a car payment, and a student loan. Each of these debts are part of my debt repayment plan – but my main goal is to be debt free.
I will be focused on achieving that goal. Along the way, the actual plan that I put in place may call for some actions not directly related to debt reduction (say, saving up for an emergency fund), but my goal – and my focus – will remain the same.
I use the following process:
Establish time frame.
Repeat for next goal.
I’ll use the “to be debt free” goal as an example.
Identify goal – to be debt free
Establish time frame – two years
Create plan – budget, emergency fund, pay lowest balance first, roll payments from paid-off debts into existing debts, etc.
Implement plan – follow through, communicate with spouse, weekly budget analysis
Anticipate obstacles – miscellaneous expenses, job-loss, friends that overspend
Remain resolute – reflect on progress, redouble efforts when facing setbacks, find encouragement from like-minded
Accomplish goal – share good news, celebrate, enjoy
Repeat for next goal – don’t stop, think big, educate self
Over and over, I find myself returning to this tried-and-true process. When I’m feeling overwhelmed, thinking about saving for retirement, increasing income, managing investments, and the dozens of other financial management areas of my life – I stop. I go back to my process. I break each area down into a manageable goal, put a plan together to achieve that goal, and implement that plan.
Obviously, there will be times when goals (and thus planning) will, in a sense, overlap. For instance, I currently have a goal of saving enough money to buy a newer automobile for my wife. Well, that goal overlaps with my goal of maximizing retirement account contributions. Both of these goals are important, but I’m not a big fan of dividing my focus. So, for the first six months of this year, my focus will be on saving enough money to buy a newer automobile for my wife – and the last six months will be on maximizing retirement account contributions.
Now, I realize that I could focus on both goals at the same time, but that’s just not how my mind works. Instead of putting $200 in savings for the newer automobile, and $200 in my Roth IRA, I’d rather put the full $400 in savings, thus focusing on just one of the two goals. Then, six months from now, I’ll turn my attention towards retirement and put the full $400 in the Roth IRA.
Why? I don’t really know why this works so well for me, but it does. After nearly six years of tracking my finances, I look back and see that I always accomplish more when I am focused on time-based goals. I just do.
When it comes to paying off the mortgage, that’s a very long-range goal – and overlaps several, much shorter-range goals. This is my one goal that doesn’t fit neatly into my process, just because it’s so big and will take such a long time to accomplish. Right now, paying off the mortgage isn’t at the tip-top of my priorities list, but one day it will be. When that day comes, I’ll laser-focus on it – and pay the thing off.
(Please note, I still send extra towards my mortgage each month, but I do so as a part of my regular budget. I have yet to turn my full attention towards our mortgage debt. That day, to be sure, is coming. Right now, however, increasing our cash reserves is a priority.)