The Power of Small: Improve Your Finances One Step At A Time
Many people like to dream big and think big. Unfortunately, the sheer amount of effort to accomplish their big goals simply overwhelms them. For instance, take a routine activity like walking across the street. You take one step at a time and you get the job done. But if I ask you to leap across the street, could you do it? This is why you should dream big and think small!
Think small is a simple but powerful idea that helped many people succeed. The most popular example in personal finance is probably Dave Ramsey’s Baby Steps. Knowing that it’s too overwhelming for people to go from “broke and in debt” to “financial freedom”, he advocates taking small steps to turn your finances around.
Likewise, you can apply the concept of “think small” in many ways. For example:
- Instead of trying to add $5,000 a year to your IRA account, it’s easier to add $416 a month, or better yet $192 every two weeks.
- You can start your retirement today, by saving 25 times the value of your annual expense on an item. For example, let’s say you spend $100 a year on magazine subscriptions. You could set aside $2,500 and try to get 4% return on investment, or $100 per year from it. If you can accomplish this, your magazine expense is retired for life.
- You can make small changes to significantly improve your business’s bottom line. For example, by improving the number of leads, conversion rate, returning customers, revenue per customer, and lowering your costs.
Basically, you can break down any big goal into smaller, more achievable sub-goals. And likewise, you can achieve significant result by making small improvements. How can you apply this to your own situation?
- Don’t get paralyzed by the big picture and start making small adjustments today.
- Make small regular contributions to your retirement savings and emergency fund.
- Cut your household expenses $100 at a time.
Think small and do something today.
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I agree. For example, the idea of having even $500 as an emergency fund seems daunting to a lot of people. They think they could never do it, so why bother even trying? They don’t think about, say, cutting one habit out of their life or even cutting that habit out one or two days a week.
Breaking it down into little tasks makes a difference in another way, too: Once you’ve met a small goal it can encourage you to meet another, and then another, and eventually you feel that you have some control over your spending. Maybe not over your EARNING, but definitely over your spending.
Use automatic investing. Set up your investment accounts & work related savings to be done automatically. This is great for dollar cost averaging. Consistency is the key.
Dollars Not Debt
Very good points. Another great tip is to purchase based upon what you have in the bank so as to avoid large credit balances at potentially high interest rates.
Nice post! Little things mean big things later . . .
I love breaking things down to the least common denomenator– it makes big tasks easier. This is especially true when it comes to your finances.
For a lot of our readers, even $192 every other week feels like a lot of money to put away. We think something is always better than nothing. If you can’t put away $80, start with $8. Put as much away as you can and add to it as your income improves.