This article is from our friends at LearnVest, a leading site for personal finance.
Trying to buy a house? Save for retirement? Finally pay off your student loans?
Then you know that saving thousands of dollars doesn’t happen overnight.
And you also know that your good intentions (“This year I’ll save $20 a week!”) can easily get pushed to the side when life gets in the way, and before you know it, you’ve gotten off track from your savings goals—again.
But a new study suggests it’s not really those shiny new boots or car trouble that stands between you and progress. The problem is time. Or, more specifically, your brain’s perception of time.
Researchers from the University of Pennsylvania found that often, the longer you pursue a goal, the farther away it seems, which can lead you to get sidetracked or give up—even if you’re close to reaching your goal.
The key factor? “Uncertainty about when the end goal is going to arrive,” says Dr. Joseph Kable, a neuroscientist and co-author of the study. A great example is when you call a company and you’re put on hold. It could be that someone will pick up in 30 seconds or 10 minutes, but you don’t know.
After you’ve been on hold for two minutes, you might conclude that you have longer to wait than you initially thought—that the end goal is farther away—and you’re more likely to say “forget it” and hang up.
“It’s counterintuitive,” says Kable, “but the longer you’ve been waiting, the longer time remaining you think you have. If that’s how your [brain] perceives the situation, it makes sense to give up, even if you’ve already invested a lot of time.”
Translation: If getting to your goal takes too long—in your perception—you’re more likely to take that money you should be saving and buy the shiny new boots. But luckily, there’s a simple fix that can help make saving a big chunk of money a much easier endeavor.
Set a specific endpoint for your goal. “The best way to persist toward a big financial goal is to make the goal as concrete as possible,” says Kable. “If you have a specific time frame in mind that you’re building toward, then it’s easier to stick to that plan and resist the impulse of giving up and using the money for something else.”
And the more specific your plan, the better. For example: “A lot of people know they need to save for retirement, but they don’t really know exactly how much they need, so they just kind of keep putting money away in a 401(k) or savings account without a real plan,” says Natalie Taylor, a LearnVest Planning Services CFP. “Take time to do the calculations, and work with a planner to come up with the amount of money you’ll need and when you’ll need it by.”
Then, once you have the big picture in mind, break it up into smaller, attainable goals. “Focus on the activity of saving money, not the outcome,” says Taylor. “Your win is to save $300 a month for retirement. Don’t worry about the $4 million you might need when you’re 65.”
In fact, a recent study published in Psychological Science found that people who break down their savings goals into cyclical time frames, like weeks or months, save 78% more money than people who solely focus on a far-off future goal.
Then, check in on your progress every six months, says Taylor. “Look back at what you’ve accomplished and course correct as needed,” she says. “Compare how far you’ve come to your final goal—are you 10% of the way there? 15%? This periodic checkpoint will keep you connected on a regular basis to what you can control in the present—and it’s motivating to see how far you’ve come.”
And the final tip to reaching your savings goals? To remember that even the best savings plans can hit hiccups along the way. “Stuff happens,” says Taylor. “Medical emergencies, job loss—but there are a couple of things you can do to help prevent these unexpected occurrences from derailing your savings.”
First, you should focus on your financial foundation. “Build up your emergency savings—a great rule of thumb is six months of income. Have adequate insurance for health and disability, and make sure you’re on your way to zero credit card debt,” she says. “If you focus on these first, then you’ll help limit the things that can derail you from your big financial goals.”