Setting Reasonable Financial Goals

When we got married, Heather was interested in living overseas and serving as a Mission Coworker for the Presbyterian Church (USA). With $90,000 of debt, we both knew this would be impossible. So, we made a commitment to take control of our debt and change our financial situation within five years. Our original goal was to pay off most of our consumer debt within that timeframe, leaving just the student loans, which would be manageable, even on the salary of a missionary. So, we took a step back and started analyzing our finances.

Start Slowly

The kinds of changes you’re looking to make in your life cannot be made overnight. Although I guess it’s possible to wake up one morning and swear off living outside your means, most people can’t do this. Think of your friend that’s always trying the latest diet fad. Do they ever actually lose the weight? No, of course not, because if they did, they wouldn’t need to try the latest fad. If you’ve ever smoked, you probably remember all the times you said “This is my last cigarette”, only to pick up a pack the next day, week, or later in the year. Think about your own financial life, think about the times you have said “I shouldn’t be charging this” or “Maybe I should cut back on this…”. What about the times you’ve received a huge credit card bill and promised you wouldn’t go on a shopping spree again? How’s that working out for you today? Exactly.

Unless we’re talking about kicking your heroin habit, impulsivity is our enemy. That goes for purchases, and also for changing your approach to money. Now, you may ask, what about cutting out all the credit card purchases, as we did in the first chapter? That’s your heroin habit and you have to act decisively. This entire program is based on bringing in more money than you have going out, and until that’s under control, there’s no moving forward. Getting ready to fix your finances is going to take months to get started and years to accomplish and after you hit your goals, you’re going to have to be vigilant about relapsing. So, get comfortable with slow, incremental change.

By now, you’ve completed your Financial Status Check and know exactly how much money is coming in and how much is going out. If you’re anything like Heather and I, you are probably shocked. I bet you didn’t know how much you were spending on lunch at the deli or the coffee shop. About a year into our marriage, Heather and I realized that although we were on target with our financial goals and vision, we always struggled at the end of the month. By this time, we both had full time jobs and were doing OK, not rolling in the bucks, but we should have had enough money to make it through the month. So we did a modified version of the financial status check again, this time sorting all our spending by dollar amount. The results were mind-boggling. We were spending hundreds of dollars every month at Starbucks and other coffee shops. Hundreds of dollars. We had dozens of transactions on our debit card for $2.13, $3.79, and $4.68. All the work we were putting into our financial goals and we were blowing it by stopping into Starbucks a few times a week. This is one of the dangers of using credit and debit cards. If you have a $20 bill in your wallet, you know when you spend it, because you have physical proof of your spending. When you swipe your card or wave your phone, you don’t have a feedback mechanism to remind you of your spending. Plus, honestly, how big of a deal is it to spend a few bucks on a coffee? Turns out, it can be huge, especially with two people and only one bank account. With Heather and I, fully 50% of our monthly transactions were less than $5 and most of those were purchases at Starbucks or the deli in my office building.

As troubling and damaging to our financial goals as this revelation was, it was a simple fix. Instead of swiping our card every time we wanted a coffee, we set a monthly Starbucks budget and used gift cards. Each of us started the month with a $20 gift card from the coffee shop of our choice. Once that money was gone, that was it until the next month. If you blew it all in the first week, tough. If you were careful and stretched it out over a few weeks, good for you, but until the first of the next month, no more store-bought coffee.

Though it seemed like a big change at the time, curbing our Starbucks habit was a simple change that we implemented with little trouble. Sure there were times we wanted another Caramel Mocha Peppermint Whatever, but in the grander scheme of things, this was a small modification of our lifestyle.

Now it’s your turn. Look at your Financial Status Check and identify three small things you can reduce or eliminate to help your overall financial health. Think of the small changes, like controlling your spending on snacks and coffee. Do you take your lunch to work or eat out? If you eat out, cut back to once a week, or maybe once a month. Through all of our financial changes, I ate out at least once a week with a close friend and coworker. I probably could have cut that out too and achieved my goals faster, but the quality time I spent with my friend was worth the other places I cut back to allow that spending. Remember, we’re not making drastic changes, just slight tweaks to our lifestyle to get us moving in the right direction.

This is your low hanging fruit. These are the small victories that we’re going to use to springboard into bigger changes later. But it’s important to make these small changes now and stick with them, so you reinforce that you can do this. You need these little victories to encourage you in the future when you struggle with the harder changes.

Our next step, on Wednesday, will be about having a Clear Goal and Vision.  See you then.

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