Thursday, April 14, 2011

Bask in the Glory of Success

It’s really pretty simple when you think about it… we have limited resources and an unlimited number of spending opportunities. When it all comes down to it we are forced to make those tough decisions because we have a natural budget (assuming you are not racking up credit card debt) – we just don’t have enough money!

I have been thinking a lot about climbing the tall mountain of financial independence lately. It sometimes seems like a lonely, narrow road with no end in sight. So I wanted to give you some encouragement today. We often get bogged down in the day to day of trying to pay down debt, save, and plan for the future.

To be honest guys, I even start to feel burnt out after a while.

So how can you avoid burn out? After all it’s a long-term game! So here it is, the five steps to avoid burn out…

I call it the Success Cycle:

Success Cycle

It’s all about setting a goal, achieving it, and rewarding yourself. Let’s do an example.

Annie has a goal of saving $10,000 for a down payment on her first house. She has been doing a great job of climbing the tall mountain, so she has an emergency fund, no credit card debt, and is living on a budget.

Let’s be honest guys, if Annie wasn’t doing the three basic steps above could we really even begin to think that she would be able to save $10,000? No Way! Without those three steps Annie can’t have this goal. So for some of you out there your first short term goal might be one of those steps.

So Annie determines that she wants to save this money, how does she know what a reasonable time frame is? She doesn’t want to be too aggressive, otherwise she might give up in the middle. She also doesn’t want to be too laid back or she will feel like the goal is not worth it.

My rule of thumb is: Any short term goal should be accomplished in 18 months or less.

Annie should examine her budget and use the 18 month rule to set a timeframe. Let’s say she decides to save $10,000 in the next 12 months. The next step is to determine what her reward is. Let me just put it this way – it has to be worth it. If you saved 10 grand and your reward was an ice cream cone, would that be very satisfying? No way! You know yourself, you know what will make you feel like it is worth it; so set a reward that will accomplish that!

The last step is to bask in the glory of your reward and success. Live it up! You really need to enjoy your reward and take a break from the intensity. Then after you are recharged – do it again.

This might seem basic… that’s because it it! The success cycle is just like anything in personal finance, it’s not rocket science! You can do it and this method is proven to help keep you from getting burnt out.

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