It’s likely that very recently…you’ve planned for something.  Whether it’s an upcoming birthday party for your children, getting in shape ready for your summer holidays or to prepare for an upcoming meeting.

Sometimes we all underestimate how much time we spend planning for the events that occur in our lives.  However we all focus on the ‘quick wins’, our short term goals and the plans we can make where we see results which are tangible sooner rather than later.

I’d suggest that the approach we all take when we focus on our short term plans is natural and understandable.

After all we like to see the results of our hard work sooner rather than later be that the excitement on your children’s faces just before their party, the admiring looks you receive from the hours spent in the gym or the sense of achievement you feel after a particularly successful meeting you’ve prepared for.

However, I’d suggest that by solely focusing and planning for our short term goals can be counter productive and by constantly looking for the ‘quick wins’ we lose sight of our longer term goals.

There are many reasons we put off planning for our longer term goals.  We know that we won’t receive immediate benefit for our hard work, our longer term goals are normally more challenging than our shorter term goals and sometimes our longer term goals feel so ambitious they are scary!

However in this blog entry I want to share with you a way to plan and achieve your longer term financial goals….

The power of the ‘small chunk’

Any large ambitious goal, financial or otherwise can be broken down.  It’s a technique used in sport, business and can also be used when it comes to building your financial security.

Let’s start with a large, ambitious and challenging financial goal.  Let’s assume that you’re 35 and by the time you retire (at 65) you want to have £300,000 ‘in the bank’.

For the purposes of simplicity I’m going to ignore the impact of inflation and any potential growth you may receive on your savings (which have a negative and positive impact on the value of your money respectively), the impact of tax and various other factors (the key point here is the benefit in breaking down the large financial goal into small chunks).

Now this goal is intentionally challenging.  Some of you might think that this goal is quite scary…but let me explain how the power of the ‘small chunk’ can make this ambitious goal achievable.

You’re 35 and plan to retire at 65.  Therefore you have 30 years to go until you retire.  This means that (assuming that you have just turned 35) you have 360 months and 10,950 days remaining.

Then let’s take our goal – £300,000 and let’s also assume you have no savings currently.  At this stage this goal looks quite scary….but let’s break it down.

To achieve a savings goal of £300,000 in 30 years.

We need to save £10,000 every year.

Which means that £833 needs to be saved every month.

and

£27 needs to be saved each day.

As you can see through the power of ‘small chunking’ a large and ambitious goal broken down can look far more achievable.

I’d also suggest that for many of us finding £27 a day ‘spare to save’ could still potentially look like an uphill battle.

However I’d also suggest that there is only two ways you can do this.  Generate more income or spend less (something I’ll be talking in a lot more depth about in later entries on this blog as well as on the videos and podcast’s on www.commonsensemoney.co.uk).

However the key point here is that, as humans we naturally focus on ‘short term’ wins.  The ‘power of the small chunk’ allows you to do break down your long journey towards your longer term financial goals.

By following the simple process and becoming a ‘small chunker’ you can easily identify your ‘daily number’ and focus on how much you need to save or earn every day to achieve your financial goal, you’re more likely to achieve your longer term financial goal and lead a happier, healthier and financially secure life.