Aug 31, 2012

Why Saving is Less Rewarding than Paying Off Debt & How to MotivateYourself to Save

It took us nearly ten years to pay off our non-mortgage debt and become otherwise debt-free, but towards the end, our debt snowball had become so big that we were able to pay off a lot very quickly.

Since then, our financial goals have changed as our lives have changed. At first, I wanted to pay off the mortgage. But then I wanted to build up a cash cushion so I could quit my full-time job as a lawyer. I did that two years ago, and the first year was really about learning to live on one income plus the substantially smaller amount I bring in blogging.

The wonderful thing is that even now, we are able to build up our savings. In fact, I have a savings goal that is so outlandish, I've given us until mid-2016 to reach it. Each month, I add up our account totals and calculate how much more we have to save to reach our goal. We've made progress toward our goal every month except one (when we used savings to pay cash for our bathroom remodel). But I've noticed the last few months especially that I'm feeling dissatisfied with the relatively slow progress we're making - just a few percentage points at best. At this rate, we may reach our goal by 2016, but we're unlikely to get there early.

I don't remember feeling that way very often when we were paying off debt, but I realized it's because there were smaller, tangible goals when we were paying off loans. We started with multiple loans and gradually paid off one after the other. So it was easy to see the balance of the targeted loan go down toward zero. We knocked off one loan, then another, so that felt like progress too. And even when the last, biggest loan was left, I approached it eagerly because of the momentum from paying off the other loans.

So the current savings goal feels different because it's this one big number waaay down the line that we're not close to yet.

The obvious solution is to break the big goal down to smaller goals and create mental milestones that will be rewarding. Since we keep our savings in different accounts, one way of doing this would be to establish a savings goal for each account, giving me a very reachable number to aim for. Another way would be to set a target for the end of the year and then have fun getting there. Just thinking about these strategies makes me feel more positive and optimistic about how far we've come and where we're going - it's going to be fun!

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