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Make Your Investment Goals A Reality (And Get Your Spouse To Help)

January 17, 2012 Leave a comment Go to comments

Many people agree with the idea of investing to create a retirement portfolio, and agree that it’s not that complicated to do. But the simplest things can be the hardest as we’ve all seen when we try to save and invest more. We aren’t made to dream about numbers growing on a spreadsheet. If that’s all the reward we get for investing most people will lose interest. There is hope though with a simple way to cut through that and make investing more exciting by understanding what motivates us.

Even if you are doing well, it’s easy to feel like you’re not getting anywhere and give up since the early years don’t show big results. It’s hard enough to convince yourself person to invest well. And if you’re married to someone who doesn’t share your interest in personal finance it’s even harder to explain to them why it’s so important. Mastering yourself and communicating well are two of the most difficult things in life. It almost sounds like too much to hope for a young couple to make and then execute a solid financial plan. I recently started doing something new that makes it much easier.

Break It Down

The reason this fails is that the goal can be anywhere from 10 to 40 years away. Many people just don’t have the motivation or ability to really plan that far ahead. Think about trying to plan a trip in 40 years. You might choose a place to go but after that you’ll say “forget about it, we have time”. Beating yourself up about it won’t help. This is part of our nature, just like many people don’t have the ability to reach over a basketball hoop without leaving the ground or the motivation to lift twice their bodyweight without help.

What will help is to use a timeframe that’s easier to understand. Almost everyone can plan for the next month. If that’s all you need to do you have a much better chance of reaching your goals. How do you reach a 40-year goal in one month?

One simple way to handle this is to plan a fixed amount you need to invest every month, using help from a financial planner if you need it. As long as you do that you’ll be working towards your goal. But even that can start to be frustrating when you do it for several years and you still have a small portfolio.

Reward Yourself Often

The next key is rewards. If you have a feeling of accomplishing something at least once a year you’ll have something to look forward too. If it’s every 3-6 months you’ll be even more motivated. And if you can share these rewards with your spouse you can avoid a lot of arguments. This is where I decided to try an experiment.

You’ve probably seen someone doing a fundraiser and drawing a thermometer chart that shows how close they are to the goal. Why not do the same for your investments? It’s no fun to be 1% of the way to your goal though, and then get to 1.1%. You need to start smaller.

Quicken tells us what we need to spend in various categories each month. Our regular utilities are one of the smaller categories, it’s easy to separate them into the different bills we pay, and we will never enjoy paying those bills. So I created a fancy thermometer chart in Excel (you could draw this on a paper too) showing how the 5 utility bills add up to to our monthly total, starting with the smallest ones at the bottom.

Then I calculated what kind of monthly income we would get from our current investments if we started living off of them, which isn’t a lot. Putting that over the chart shows how much of our bills would be paid by our investments today. Now instead of saying “we need to think about retirement” we can say “if we do this for 3 more months our power bill will be paid off, FOREVER”. Just writing that makes me want to find some cash to invest!

Make It Easy

The most important thing is starting small. When you have a large portfolio you can increase your potential investment income by $2500/month in one year but at first you will have smaller numbers. Start with something small and you will see yourself reaching your goal quickly which makes the next goal more exciting. By the time you get to the bigger expenses your portfolio will be growing faster so it will be easier to cover them.

Since this is the first category we take on I even cheated a bit by including a portion of our bills used for my business and including the payment from the business in our investment income. It’s more motivating to see that you’re 3/4 of the way to $1000 instead of 1/2 of the way to $500 even though you have $250 to go either way. When we add the next category I will continue including this one below it so we can see what we’ve already done.

I personally don’t have much trouble investing. I read about finance constantly and the more I learn the more excited I get to invest more and avoid wasting money. I expect that I’ll have the choice to stop working in 15-20 years with the current plan. But even for me it can all start to feel too abstract after a while if I’m just seeing numbers on a screen. And being married means my plan is just one part of the picture. We don’t need any reminders to stay out of debt but there’s a lot more to do beyond that.

Using this chart to see how we’re doing is a powerful way to increase motivation and show clearly that we’re making progress. To make this work, think about what would motivate you most. Is it not having to think about your bills? Or is it having your investments pay for a night out once a month? Look at the easiest things first and you’ll build your momentum quickly.

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  1. December 15, 2012 at 12:20 pm

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