From buying a home to taking a year off work to travel the world, we’ve all got a big-ticket financial goal or two we’d love to check off our bucket lists. But try to map out your path to that 20-percent down payment or $30,000 savings account balance, and it can get overwhelming—fast.
Fortunately, there’s a simple solution. Researchers have found that breaking down your major ambitions into mini milestones helps you maintain motivation for the long term. Here’s what you need to know to apply the “small win” strategy to accomplishing your financial goals.
According to Certified Financial Planner Richard M. Rosso of Clarity Financial in Houston, Texas, turning your milestones into bite-size goals allows people to gain control. “You’ll feel more accomplished and positive about taking bigger steps,” he explains.
Most importantly, thinking small (“I want to save $1,000”) encourages you to simply start—rather than feel paralyzed by a seemingly insurmountable goal (“My emergency fund should total $10,000”).
Once you’ve got a couple quick wins under your belt, your brain will start to associate progress with happiness. “Most people tend to feel some psychological discomfort around an unfinished goal,” says clinical psychologist Ben Michaelis, Ph.D. “When we complete a small goal, we tend to experience some measure of relief from this tension, which we experience as pleasure.”
Because even the smallest of changes can add up to big results over time, Rosso says you can classify almost any behavior modification as a small win—whether it’s canceling a magazine subscription you never use or scaling back your dining out habit to once a week instead of three times.
Here’s another example: If your goal is to save a specific amount for your future—say, to build your retirement account to $1 million—you can implement small changes now that will make a large impact over time. For instance, you might increase your 401(k) allocation by 1 percent every six months or commit to putting at least 10 percent of your annual bonuses into your retirement account. “You won’t even feel the difference in your cash flow,” Rosso says.
Since the adjustment period is painless—and you’ll soon see the benefits as your account grows—you’re more likely to stay on track with your objective. After a few months, you might increase your 401(k) contribution, easing into saving even more. You might also celebrate benchmarks as you meet them—i.e., $5,000 saved, $10,000 saved and so on.
Eventually, you’ll hit your big target. “These ‘milestones’ allow people to ease into larger goals. They don’t get frustrated, they don’t give up, they’re encouraged, empowered to take on mountains after climbing the hills,” Rosso says.