Last weekend I asked you all to start thinking of a few targets in your life that you wanted to hit in anticipation of this post. I hope you all have at least 2 targets ready! Like I mentioned, my favorites are 12-month targets – mostly because it’s relatively easy to stay motivated for 12 months and pretty simple to think one year in the future… (How many times have you said “wow – it’s been another year already?!?!” It goes by quick.)
OK – so you have some targets. Now what? Simple. (No seriously, that’s really important. It must be simple – or it won’t work.)
Three rules. Once you get the target defined here are your steps:
1. Break it into small chunks. Break your goals out by month. Want to pay off $25,000 in debt in one year? That’s $2,083.34 per month. We’ll use the $25,000 of debt figure for the rest of the example.
2. Plan one month at a time. That means you plan to hit your one-month target in the first month and then again each and every month. The goal is to “find” $2,083.34 to go to debt in month one. Don’t worry about month two yet. If you can “find” the money in month one you know you’re on track. And that’s the key – knowing you’re on track.
So plan on “finding” $2,083.34 in month one. I use “finding” purposely because it involves cutting spending, making more, selling stuff and any other (legal and ethical) way to increase the money you have to use and decrease the amount you need to dedicate to other parts of your world. Got it? Remember, look for money leaks too, like subscriptions you can cancel.
OK. What spending can you cut? Can you pick up an extra shift or overtime? What can you sell? Can you do side work babysitting, shoveling snow, mowing lawns or raking leaves? Let everyone you know that you’re trying to hit a goal and ask that they keep their eyes open for you.
Now take that money and pay off as much debt as you can. I don’t care if you pay your debts smallest to largest or highest interest rate first, but have a plan. If I had to pick I would probably tell you to pay your debts smallest to largest in balance without regard to the interest rate (i.e. Dave Ramsey’s debt snowball). Why? Because even if it takes you an extra month to reach your goal (it doesn’t always) paying off a debt is motivating and frees up extra money to apply to other debts because you no longer have that minimum payment.
I know, the “math” says to pay highest interest rate first. But there’s a difference between theory and reality. I want you to do what “will get you out of debt,” period. Got it? More on this in later posts.
3. Reflect and reassess after every month, but keep your foot on the gas. OK. Now month one is gone, it’s time to reflect, reassess and move forward on month two. What worked? What didn’t work? Where did it hurt a lot to cut? Where was it easier than you thought? Take note of this and you’ll be in way better shape to kick butt moving forward.
Now look at the numbers. How did month one go? Did you get $3,000 of the way there? Great, you’re ahead. But don’t let your foot off the gas. Month two you still find the same $2,083.34. I know the tendency would be to recalculate the monthly amount if you have a good month but I don’t like that for two reasons.
First, it leaves you scrambling a bit if something goes wrong and you have a “slow” month. Second, momentum is a powerful beast. When you have it on your side, there’s very little that can stop you. When you let off the gas, you’re letting go of some of that momentum. And if the momentum turns against you, watch out!
I could go on for a while, but I’ll stop so I don’t over complicate things. Follow these simple rules and you’ll be well on your way to hitting your target. I’ll be updating my 2012 goals soon and will talk a bit more about how I broke out my goals into monthly targets, planned for January and what worked and didn’t.
Now go break out your goals and get ready for February! It’s a short month – only 29 days. Fewer days to spend money, right? Haha…
Until next time, put your credit card down and slowly step away from the mall!
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