You’re trudging through a barren, hot desert of working, working, working and saving, saving, saving for retirement, and the goal is far away. Occasionally there’s a mirage. You hope the oasis ahead is real this time—then you realize you’ve got about 20 or 30 years to go!
My blog post Seeking Financial Freedom, Not Just Retirement talks about reframing how you think about your retirement account so it becomes your Freedom account instead. Even with this new perspective, freedom is a long way off for most people. Because the goal’s at such a distance, it’s important to have meaningful sources of short-term inspiration that don’t undermine wealthy habits. This is particularly true if you don’t like certain aspects of your job.
Save for Today
You might remember reading about Surviving and Thriving in an earlier blog. Surviving is when you spend money on the basics, while Thriving is using your money to make your life more meaningful. Thriving can pertain to the distant destination of Freedom (formerly known as retirement) or to shorter-term goals I call Purpose goals.
Purpose is about saving for something we can look forward to within the next year or less instead of the next few decades. Using the concept of simple living, we trim our spending to
make more choices in favor of what we value as opposed to spending mindlessly.
Choose Your Inspiration
Here’s an acrostic to help you make finance fun with a Purpose goal that ADDS inspiration and meaning:
Achievable: Purpose goals should be achievable within a 12-month period, not “Someday, when I retire . . .” A goal that costs more than you can save in 12 months is too big. Shoot for a small pleasure or break your goal down into smaller ones.
Desirable: You need to be inspired, so pick something you really want instead of something you should do or will buy anyway. Purpose goals should be so appealing that you’ll give up other purchases for them.
Defined: Vague goals don’t give you something concrete to shoot for. Think about a very specific goal, define it clearly, and write it down so it can inspire you.
Smart: Some purchases bring more happiness than others. Remember that simple pleasures and experiences (rather than “stuff”) are great buys for happiness.
Reach Your Goal
You can start earning your Purpose with these easy steps:
1. Write the name of your Purpose goal on a blank envelope. For extra inspiration, glue, tape or draw a picture of your goal on the front. The picture might represent your vacation destination, the iPad® you want or the out-of- town sporting event you hope to attend. The idea is to make your Purpose goal tangible.
2. The first month, put a predetermined amount in the envelope from your Survive account as soon as money is available. The amount should be a monthly total that enables you to reach your goal within your timeframe, but it shouldn’t be more “fat” than you can trim. For example, if your goal is a $1200 weekend escape with friends in 12 months, then put $100 in the envelope.
3. Seal the envelope and carry it with you. If you want to avoid carrying cash, put a picture of your goal in your wallet. You can even tape it to your credit or debit card.
4. Whenever you’re about to make a purchase of any size, ask yourself if you’d forgo the purchase to achieve your Purpose goal sooner or to be more certain of reaching it.
5. If you make it through the month without opening the envelope and dipping into Purpose money, deposit it into a savings account for your Purpose.
6. You can also sweep into your Purpose account whatever’s left at the end of the month in your Survive account.
7. The next month, restart with step 2.
This is a great money-saving technique because spending Purpose money feels like a loss. The pain of losing some Purpose money outweighs the psychological pleasure of gaining the immediate purchase at hand, so saving starts feeling like the right thing to do!
Want to learn more about setting up different Survive and Thrive accounts? Check out our Moneymentals Course!