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Whether you're saving for a home down payment, retirement or dream vacation, reaching long-term money goals can be overwhelming.
The key to success? Pick a method of handling your finances that matches who you are.
Experts say the key is to be honest about your financial behavior and then adjust your approach accordingly. Do you freeze up when plans go astray? Tend to ignore monthly bank statements? There's a long-term savings strategy for you.
You're likely one of these five money personalities. Find yours, and learn how to stay on track.
The Quick Starter: You get fired up at the beginning but easily burn out.
Setting a goal can be exciting — a little too exciting for some, in fact.
“The main hurdle that people tend to struggle with when setting money-related goals is that they try to do too much too quickly,” says clinical psychologist Ben Michaelis, Ph.D. On the contrary, “slow change is good change. When I am working with patients on these sorts of goals, I always advocate going smaller to go bigger.”
Set smaller benchmarks and meet them little by little, each week or month.
Enlist a friend or family member as your accountability partner. Schedule check-ins with this person. He or she can be a valuable sounding board if you, say, want to go above and beyond for a given stretch of time. Ideally, this person will know you well enough so that he or she can encourage you to test your limits without overextending yourself.
The Long-Term Planner: You like to think ahead but get derailed when life gets in the way.
When you’re working toward a long-term goal like saving up for a down payment, you don't know what the future holds. The reality is that life may change significantly within the next year, or even the next month.
“When you have long-term goals it is important to not go too far out into the future,” says clinical therapist and life coach Cara Maksimow. “Keep in mind how things can change and focus on one year or less at a time.”
Break down your goal into smaller chunks, perhaps quarterly or even monthly, to account for the unexpected. That way, you can revisit your money plan and change it as your life does.
The Flip-Flopper: You go back and forth on what your goal should be.
Simply setting a goal, in terms of how much you want to accomplish and how soon, can be a challenge. “Setting a goal that does not require any stretching is not really a goal, and setting one that is too far outside of your comfort level often doesn’t work,” Michaelis says. “When you set goals that are a bit challenging but achievable, you end up pushing yourself just enough."
So how do you find that sweet spot?
“Ask yourself: ‘What is the percentage likelihood I am able to achieve this particular goal?’ and give it a number,” Maksimow advises. “If you find the number is below 70% you are most likely setting yourself up for failure. If it is 100% it may be a bit too easy. You want to see yourself somewhere above 70% in order to be challenged and still realistic.”
Consider factors like your savings or amount of debt to calculate your percentage — and readjust your goal.
The Instant Gratifier: You just can't resist spending money on things you love.
Life is rife with tempting impulse buys that can distract you from the prize.
Automate, Michaelis recommends. Instead of using money “left over” from your budget, transfer a set amount from each paycheck directly into a dedicated savings account.
“If you are saving up for something like a vacation, try using an automated process so that saving just happens without your having to actually do anything over and over again,” Michaelis says. (Automation also works well for retirement, down payments and other large sums, too.)
Plus, automating savings into an account means you never see the money. That way you can stay on track even if you splurge.
The Avoider: You'd rather bury your head in the sand than deal.
When it comes to very long-term goals, like retirement, some of us are tempted to just avoid thinking about it — especially if it seems like we won’t ever get there. For instance, you committed to adding $200 per month to your IRA, but you run into a few months where that’s just not possible. So you completely put off contributing.
But as you'd expect, this tactic will only derail your goals, says financial planner Natalie Taylor, CFP®. “It’s especially important to focus on doing what you can, even if you’re not fully on track,” she explains. “Something truly is much better than nothing, so start moving in the right direction and look for opportunities to speed up progress over time, like extra paychecks, side gigs, promotions, renting a cheaper place when your lease is up and so on.”
Try to make any progress, even if it’s small. Putting away $25 per month for a stretch before inching that amount back up is still better than nothing.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.