Making Saving More Exciting: Early Results Are Good

One of the biggest reasons people don’t manage their finances well is that it takes a long time to see the payoff. Most people can understand the idea of investing for the future but when you start off and you’re getting $0.30/month from your investments while your friends are whipping out their iPhones that’s not very motivating.

This year I came up with the idea of combining smaller wins with an old fundraising tool. I started to track an estimated income from our investments and used a spreadsheet to make a “thermometer chart” to show how much of our expenses this covers. It’s more of a brick than a thermometer but it shows our progress.

That’s still not very motivating since no one gets excited about being 3% of the way there so I moved the goal line. Instead of tracking it against all our expenses I started off comparing it to our utility bills (heating, water, power, tv/internet, and phones). And then I added a running start by including the full value of the bills and adding a monthly re-payment from my business (since I use some of these for business with my home office) to our investment income.

I’m well aware of how much I’m cheating here but the results are accurate. This shows us how much of our utility bills we still need to work for. I organized these from smallest to largest so we could knock off a few quick ones. For example we could say early on that we never had to work to pay for the heat or water again. At first our plan was that everything but our phone bills would be covered by the end of this year and our additional savings next year would cover that.

We’ve managed to take a few extra steps this year and got ahead of the plan. By the end of the month we’ll be more than half-way through the amount needed to cover the phone bills and we’ll reach that full amount in another 6 months just from automatic transfers. If we do anything extra we’ll get there even sooner.

We look at the chart every 1-2 months so it’s been a constant reminder of how things are moving forward. I’m not sure exactly how much it helped since I am naturally motivated to invest. But seeing visible progress every few months made it more real and gave us results that are easier to see and understand.

Once we reach an amount high enough to cover all our utility bills that will give us a real accomplishment to celebrate even if we still need to work for another decade or more. At that point I’ll expand the chart to include some more expenses. I think an ideal would be to make the next target twice as high so I’ll find a few more categories to reach that.

Food would be a natural next step since it’s important but our current food spending is about 50% higher than our utility bills so that might be too big to add now. We’re hoping to reduce that average cost so maybe it would work. Or the new goal could be a combination of smaller things such as property taxes, regular car expenses, and personal care. That would create more steps to reach along the way even if it adds up to the same amount.

Still food may be the best thing to add. If we can say in a couple of years that our investments are enough to pay for our bills and our food, that doesn’t leave a lot of ongoing essential expenses. Having a bigger goal like that would be a motivation and a challenge to do more which makes sense since we still have a long way to go and we need to work hard for it. It might even lead us to spend less so we can move the goal closer.

Overall this is a great way to track your progress and even more useful when you have to explain it to someone else and help them to share in your motivation. Maybe it’s the long-awaited trick to help reach smart goals after someone has paid off their debts. Paying off a $20,000 credit card balance in 2 years is easy to understand. Paying off a mortgage is harder but still a visible goal. When you set goals this way you can pay off all your living expenses one by one and then truthfully say that you never need to work for them again.

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2 responses to “Making Saving More Exciting: Early Results Are Good”

  1. TimelessFinance says :

    Not a bad way of thinking about it. After a person pays off their mortgage, essential living costs decline a lot. With a lower bar for investment income, success will come a lot sooner and make longer term commitments more motivating.

    • Simply Rich Life says :

      Tell us all about it in 5 years :) A mortgage payoff goal might actually be harder to visualize using this method since there is really no way to break it down into smaller pieces. The advantage is that when you tell people you paid off your mortgage they understand. When you say you’ve paid off your groceries for life they just give you a weird look. Either way I’m sure you won’t take long!

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