Setting Financial Goals with a Five-Year Plan, The Tiny Tweaks Principle

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Most often when we think about setting financial goals we think of the most fundamental aspects of our finances. Areas we manage and feel we can control on a regular basis.

For example, we set financial goals around budgets, to lower monthly expenses. Saving money, to put more money in our bank account. Paying off debt, so we can get out of debt faster.

Setting financial goals in these areas of our finances is important. It helps us focus our efforts in those areas that can immediately impact our financial wellbeing. And lead to financial security and independence.

Of course, setting a goal is one thing, actually reaching the goal can be a different matter.

The Problem

The challenge with these types of financial goals is that they are generally established as short-term objectives. Short-term because we manage them on a daily, weekly or monthly basis. In addition, the goals we set are influenced by a lot of other things that are going on in our life. Over time it becomes easy to lose track of the reasons we established the goals in the first place. We lose sight of the big picture.

How often have you set financial goals for budgeting or saving money and not kept them? How often have the financial goals you set been disrupted by other situations in your life?

For example.

It’s Kind of Like Ice Cream and Losing Weight

If your goal is to lose weight, one of the things you might decide to do is eat less ice cream. Eating less ice cream on a daily basis would cause you to lose weight. Sounds simple right?

The problem is that on a daily basis we encounter other situations that can affect our decision not to eat ice cream.

McDonald’s is advertising a special this week on their regular size milkshake – buy one get one free. Sounds like a good treat for little Jimmy on the way home from soccer practice. We can both have one.
The kid’s birthday party starts out with games and a sleepover and ends with cake and ice cream.
You’re going shopping. The local grocery store has a coupon for 50% off your favorite Ben and Jerry’s flavor – Glampfire Trail Mix.

All of these outside influences make it hard to achieve the goal of not eating ice cream. Eventually, we give in to the temptation and in doing so fail to meet our goal. We give in because, in the moment, we lose sight of the main reason we stopped eating ice cream. To lose weight, to feel better, to look better, to live a healthy life.

Budgeting, saving money…our finances are no different. A goal of spending less money gets sidetracked with all the opportunities to spend money.

Setting Financial Goals with a Five-Year Plan, The Tiny Tweaks Principle

Creating Change is a Process, Not a One-Time Event

Have-To versus Want-To Goals – The Tiny Tweaks Principle

In the book Emotional Agility, renowned psychologist Susan David, Ph.D. (TED Talk Video) discusses the importance of being emotionally adaptive. Through her own experiences and well-documented research, she explains how we can use our emotions to initiate positive change. To get unstuck and lead a more full filling life.

The Tiny Tweaks Principle is a chapter that focuses on creating change through the small incremental adjustments to our beliefs, habits, and motivations. And how creating change is a process, not a one-time event.

Motivations come into play when we establish goals. Discussed in the book are two types of goals. Have-to goals and want-to goals. Have-to goals are often established out of a sense of obligation and can feel self-imposed. Want-to goals are goals established based on our interests and aligned with our values. Achieving want-to goals has a higher rate of success because we choose to make them.

I recognized many years ago when I was trying to get a handle on my finances, that all the day to day “life” events made it very hard to stay focused on my goals. The want-to goals I originally established around my finances started to feel like have-to goals. Which inevitably caused me to abandon my efforts.

Are you budgeting, paying off debt, trying to save money? Are your financial goals starting to feel like have-to goals?

If you’re feeling stuck in work or life I highly recommend reading Emotional Agility. It will provide you with new perspectives on how to create change by managing your emotions, habits, and motivations. You can buy it today on Amazon.

The Five-Year Plan – Want-To Goals

When I graduated from college, I started establishing goals of what I wanted my career to look like in the future. I would write down where I wanted to be in five years. The type of company I was working for. My job title and what I was doing. How much money I was making. What I wanted my career to look like.

I would review my goals on a monthly basis, to remind myself of where I was trying to go. Eventually, I carried this type of goal setting over to my finances and other areas in my life.

What I found was that by reviewing my long-term goals monthly, it started to influence the decisions I was making on a daily basis. The daily decisions I was making were aligned with where I wanted to be in five years.

If you’re struggling to meet your financial goals (or eating ice cream) because they are starting to feel like have-to goals. Try setting financial goals based on a Five-Year Plan. A set of want-to goals will help you stay focused and motivated. A Five-Year Plan will help you align the short-term goals surrounding budgeting, saving money and debt with where you want to be in five years.

How to Set Financial Goals with a Five-Year Plan

A simple Five-Year Plan for achieving your financial goals might look something like this.

Ask yourself, in five years I want my financial picture to look like this:

$5,000 in my savings account.
No credit card debt.
Saving a $100 per paycheck toward retirement.

In addition, setting financial goals with a Five-Year Plan should include other aspects of your life that are positively impacted by you reaching your financial goals.

I live in a new home
Have a new career or job.
I am saving up for my kid’s college education.

Write these goals down and place them somewhere you can review them on a regular basis. A nightstand, your refrigerator, your checkbook. At a minimum review these goals on a monthly basis, or each time you budget, write a check or save some money.

You can download a free copy of my Workbook, which provides a printable template for creating a Five-Year Plan. Sign up below to download.

Tiny Tweaks – Financial Goal Setting

The Five-Year Plan provides a marker or horizon of where you’re trying to get and it keeps you focused and motivated in reaching those short-term goals. Your decisions on how to spend, budget, save will start to change in small incremental ways (tweaks) – in some cases, you may not even realize it.

Over time as you move closer to reaching the objectives of your Five-Year Plan you can add or remove individual accomplishments and create a new set of goals.

The Final Word

Is setting financial goals important in regards to your budget, debt, and savings. Absolutely, how else would you successfully manage your day to day finances?

However, don’t allow your daily, weekly or monthly goals to cause you to lose sight of why you created them in the first place.

Create a Five-Year Plan consisting of want-to goals and allow that plan to help dictate your motivations. And keep you focused on your long-term objectives and ultimately what you are trying to achieve.