It’s important to set goals for yourself in anything you do. Whether you want to learn a new language, become a great cook, or set aside a large sum of money for retirement, you can set goals along the way to keep yourself motivated and make the larger goal more approachable.
Breakdown Your Main Goal
My goal is to save $3,600,000 in our 3 retirement accounts by the time we are 57 (about 27 years away). That number seems so big, I can hear that voice in my head saying to me “it’s not possible, so what’s the point”. In order to make that goal more manageable, I need to break it down into smaller sub-goals.
- Roth IRAs Maximized ($11,000)
- 401k Maximized ($18,500)
- Home Equity Loan Paid Off ($60,000)
- Car Paid Off ($10,000)
- House Paid Off($210,000)
Even these sub-goals are too big by themselves. In order to stay motivated to complete your goals, you need to keep breaking down your goals into ones that can be completed at least every 3-7 days. The positive feelings that you get when you complete a goal can give you a boost to keep going.
I use this strategy when I have chores to do around the house. When I don’t want to empty the dishwasher, I tell myself that I can at least do the top level (silverware). Every time, without fail, the good feeling of completing that small goal motivates me to empty the entire dishwasher. Small goals are incredible enablers to achieve bigger success (and they keep my house cleaner).
Think Small for Big Success
In order to find success every 3-7 days, I need to break down my sub-goals. If I do it correctly, I will have an opportunity to complete a mini-goal every few days. The momentum of completing the smaller goals will carry me to my ultimate goal of becoming a millionaire in 4365 days. Here is how I broke down each of my sub-goals:
Maximize our Roth IRAs
For the Roth IRAs, we would need to contribute ~$212 post tax per week to maximize them over the course of the year. Last year, I used my work bonus to maximize my IRA, and I like the thought of doing that instead of reducing our regular income by $200. Currently, we have ~$50 per week going into the Roth IRAs, as a way to buffer in the event that we have a bad year at work and our bonuses are smaller than normal, we only need to put in $6,840 at bonus time. So my mini-goal for the Roth IRAs is to make that weekly contribution of $25 into each account.
Maximize my 401k
For my 401k, I calculated the contribution level I needed to be at to maximize the contribution each year. The mini-goal is to set my contribution percentage to that amount and leave it alone. With every Wednesday paycheck, I meet that mini-goal. Even though each of my paychecks look the same from week to week, I still pull each one up just to look at the 401k contribution. Looking at that number and the company match keeps me motivated to keep going.
Pay off our Car
For the car loan, we currently pay $461/month at a 3.95% rate. I would LOVE to add additional to the principle, but you have to jump through a lot of hoops with CarMax in order to do that. So this mini-goal is to simply keep making our monthly payment on the 23rd of each month. The car is scheduled to be paid off in early 2020. Once that is paid, we will snowball that money into our Home Equity Loan (HEL)
Pay off our HEL
The HEL is $493/month at a 6.74% rate. We set a mini-goal of making bi-weekly payments of $450, an extra ~$10,500 in principle each year. When you add the car payment towards the HEL, we will pay it off in about 4 years. A mini-goal is completed every 2 weeks.
Pay off our House
Currently, we pay a pretty low interest rate (3.25% on a 30 year mortgage). I have wrestled with the idea of speeding up our payments. Due to the low rate and long term, I know it would be “smart” for the extra money to go into a brokerage account. We would turn that $1,490/month into $161,000 in the remaining 7 years to 2030. But we also have plans to remodel our backyard and make the space much more usable and accessible to our kids. When the HEL is paid off, our oldest would be 6. The perfect age to use the half acre of land we have for outdoor activities! The two goals that matter to hit our Millionaire goal are the 401k and Roth IRA goals. So instead of immediately injecting that money into savings, we will use it for a few years to build a back yard space that will (hopefully) provide memories for our children that money will not be able to buy them when they are older.
Eventually that money will be devoted to savings, but not soon enough for it to impact our 2030 goal.
If you look at a typical month, we are set up to accomplish a couple of mini-goals every week!
The picture below is colored each time a mini-goal is hit in a typical month.
We hit a mini-goal 12 days a month. It is so incredibly motivating to be celebrating all of those little successes each and every week. Also – our mini goals basically spell out “Hi” in the calendar above, DOUBLE WIN!
Apply the strategy of breaking down your big goals into smaller sub-goals and mini-goals. Aim to hit those smaller goals every 3-7 days and watch your motivation actually INCREASE over time, instead of sputter.