If financial decisions are intentions — “I want to save more money this year” — then financial goals are more specific — “I plan to cut discretionary spending by 20% each month.”
Financial actions are the actual steps you take to make progress – “I will sign in and cancel any subscription service I haven’t used in the past 30 days.”
The goal is the expendable part of that process, says Peter Bregman, executive coach and CEO of Bregman Partners, an executive coaching firm.
As a coach, he helps leaders focus on what’s important. He says that people often ignore the intention of the change they want to make because it is believed to be implicit. This can lead to tunnel vision and inflexibility in specific goals.
He suggests skipping goals, and going straight from intention to action.
Let’s say your financial intention (call it a resolution) for 2023 is to spend less money and pay off debt. Say it out loud to someone who will listen, says Bobbi Rebell, certified financial planner and author of Launching Financial Grownups. Now, with a sense of direction and accountability, you can make money moves, without the need for goals.
Money Transfer 1: Look at the numbers
Get a recent paycheck and piece of paper, or get paid great with Free budget planner. Write your monthly after-tax income at the top, then list our financial obligations, says Rebell. Think rent, utilities, groceries, child care, transportation and any other bills and debts you have to pay no matter what.
Subtract these basic expenses from your monthly income. The remaining money is what you have for it Estimated expenses and savings.
“It’s not usually as bad as you’d think,” Ripple says. This exercise tends to reveal that a lot of expenses are discretionary, she says.
Use bank and credit card apps to collect all other miscellaneous expenses. From there, you can probably find a few things to clip. If you’re not sure where to start, take the budget hub to a streaming service. You may be surprised at the joy it brings you.
Money Transfer 2: Make it more difficult to buy things online
Debit cards, credit cards, cash apps, and digital wallets make spending easy on the front end. A dull ache later hits even though the bills are due, especially if you’re carrying a credit card balance.
It’s time to make shopping inconvenient. Delete retailers’ apps, unsubscribe from their mailing lists, and remove stored credit cards from browsers and websites, says Rebell. This may sound trivial, but doing so adds friction to your purchase. You’d probably think twice about that new shoe if you had to grab a credit card and hand numbers to your phone at checkout.
It’s basically a modern version of “freeze your credit card in an ice cube,” she says. And yes, a frozen credit card is literally a thing.
Money movement 3: Choose a method to pay off the debt
Take another look at your list of liabilities and focus on debt this time. Note the amount you owe and the interest rate on any money borrowed. Think things like paying off a car, student loans, or a carry-on balance on a credit card. Now, choose a prioritization strategy.
Consider using a file Debt snowball or Debt collapse An approach to paying off what you owe. With a debt snowball, you focus on your smallest balances first, and hope for quick wins when you close the loans.
With a debt avalanche you prioritize higher interest rate loans to eliminate the most expensive debts first. Credit card bills are a good place to start a debt avalanche because of the exorbitant APRs.
Both methods have advantages. The important step is choosing the path and making the first move.
New financial year
If goals are what get you from point A to point B, by all means set them. But don’t let setting percentage goals stop you from simple actions that help you take control of your money.
Small steps can really make a big impact, Rebel says. “Do what you can, and don’t be so hard on yourself.”
The article Financial Actions Louder Than Decisions originally appeared on NerdWallet.