Set goals

Achieving what you want financially is difficult without clear and achievable goals. A vague “I want to do well financially” or “I should really get my finances in order” is just like saying “I want to eat healthier” or “I don’t want to be obese”. It is usually much easier, and more fun, to work towards a big goal if you break it down into smaller milestones and also have concrete plans to rely on regarding how you will reach these milestones. Having a goal is great, but you also need to have a plan about how to get there.

set goals


Let’s say that you want to cut down on everyday expenses in order to pay down a costly credit card debt or a costly loan with high interest rates (read more about interest free loans). You have a habit of spending $5 each workday on coffee from the coffee shop next door to your office. $5 x 5 days = $25 a week.


Now, instead of just saying “I should spend less on coffee and pay down my credit card debt faster”, you need to make an action plan.


Simply going cold turkey on the coffee is risky, because you would be placing yourself in a position where the smell of the coffee from the coffee shop would be enormously tempting as you walk by on your way to work. You would probably start negotiating with yourself, telling yourself that you really need to buy coffee, just today, because of that important work meeting, or because you slept bad, or because….


A better action plan is to commit to brewing coffee at home each morning and bring it in a thermos mug to work. Instead of telling your brain not to do something, you are now telling your brain to do something. You have an action plan, rather than an abstinence plan. Instead of relying on your capacity to completely refrain from coffee, you are relying on your capacity to brew coffee at home.


It is often easier to stick to an action plan if we frame it as something nice. Instead of thinking “I’m abstaining from coffee shop coffee” think “I’m brewing my favorite brand of great coffee at home, instead of accepting whatever the coffee shop has to offer”.


When we create an action plan, it can be tempting to be very strict. “I will drink no morning coffee!” or “I will buy the cheapest possible brand of coffee and brew at home” or “I will only drink coffee from the cheap but horrible coffee machine at work”. When we first start out with a change, it is often better to be generous with our self, to increase the chance of us actually following the action plan. (There are exceptions of course, in some situations strict is really the way to go.) So, in the coffee situation, instead of trying to save all the $25 a week buy not drinking morning coffee, instead be okay with only saving a portion of it.


Let’s for instance assume that you go ahead and buy 2 lbs of a really nice organic high-quality dark roast Colombian coffee that you really like. It costs $15 per bag which is much more than you would pay for 2 lbs of a low-end coffee. Now, how much coffee grounds you use when you make your coffee in the morning will of course depend on your personal habits, but a good rule of thumb is that 1 lbs of ground coffee will yield 32 eight-oz kitchen cups of coffee. If you get 64 cups of morning coffee out of your $15 bag of coffee, that brings us to to a cost of $0.24 per cup. Even if we factor in the cost of water, electricity and the purchase of a basic thermos mug, we will still land on roughly 25 cents per cup – a big difference from purchasing a $5 coffee. You will be saving $4.75 per day.


As you can see, you don’t have to abstain from coffee or settle for low-end coffee to save money. You just have to put in the effort to make the coffee yourself. You get to enjoy high-quality coffee in the morning while simultaneously paying down your credit card debt.


When you set goals, map out milestones and formulate action plans, try to find situations like these, where your actions quickly can become a nice daily habit. If your financial road map simply consists of high-flying goals and strict bans, you will most likely start looking for reasons to veer off the path.