Short-term financial goals may be more reachable

McClatchy-Tribune News Service (MCT) - Have you ever tried to plan something months in advance and find yourself doing everything at the last minute? Apparently, that long-term type of thinking fails with money too.

We are more successful in meeting our financial goals when we make them short-term instead of long-term, according to research by Rice University and Old Dominion University. Participants in a study who planned to save a certain amount each month were more successful than those who planned to save a set amount for a year later. In fact, the month-to-month savers ended up saving more over the long-term.

"Our study shows that Americans are better at saving money when they are thinking about it month-to-month, on an ongoing basis rather than a long- term goal," said Paul Dholakia, associate professor at Rice's Jones Graduate School of Management.

This research points to the need to think of long-term goals as an end rather than a means. Tiny steps need to be taken along the way, such as figuring out the goal and making monthly, or weekly, steps to meeting it.

For example, saving for a $2,000 vacation in a year or planning to pay off a $2,000 debt in a year is more successful if $166 is saved every month for 12 months, or $42 a week for a year. To be more disciplined, put the money in a separate savings account.

When you see what you need to save every week you become more aware of your expenses to make sure you have that amount left over to put into that savings account.

"It will be painful, but like that mortgage or car-loan payment, we need to start thinking about a savings transfer every pay period," Dholakia said.

Like everything else in life, controlling our minds is more important than responding to emotions and letting our emotions trick us into believing we will eventually reach our goal. Implant in your mind now a systematic way of meeting your goals to extinguish irrational thinking.

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(Dan Serra is a financial writer in Colorado Springs, Colo. Send questions or comments to serrafinance@yahoo.com.)

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