When do you allow yourself to be tempted?

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The path to FI is quite a simple one in principle:

  • Pay down debts
  • Build a cash buffer
  • Max employer pensions
  • Invest what you can and regularly
  • Live within your means

Obviously not everyone is handed a fair start in life, and not everyone earns the extortionate sums sometimes thrown around in the FIRE forums, but the basic principles can help and apply to anyone on all levels of income.

Again, this is sometimes a lot easier said than done. With over 14million people in the U.K living below the poverty line, many are far more concerned with where the next meal is coming from than their long-term financial goals.

I’m in an incredibly fortunate position compared to many, but even I am constantly wondering how the hell I’m going to afford a basic flat/house with average house prices constantly reporting all-time-highs and with no signs of slowing.

Despite sometimes reaching a 40-60% savings rate I struggle to justify even small luxury purchases for fear of the ‘Mail brigade’s’ wrath that the only reason I don’t have a 4-bed in Surrey is because I like the odd craft beer on a Friday.

But you have to learn how to treat yourself. That’s the perverse nature of the ‘Mail brigade’s’ argument against the younger generation’s supposed frivolities.

Any goal – money related or otherwise – has to be met at various stages with small rewards in order to remain motivated and focused on the end-result; no one runs a marathon as the first time of trying, they build on months of training starting at smaller distances and build up from there.

But when do you allow yourself to reward yourself with these small rewards? And how much do you allocate to these milestones?

Too small a reward and it won’t really seem like anything more than what you might already treat yourself to anyway – I’m thinking coffees, those dastardly craft beer etc.

But too big and you could drive too much money away from your savings pots that are the whole reason for these rewards in the first place.

Some suggestions

There’s no magic formula for this as I don’t have any set rules that I stick to either. But here are some suggestions you could try and implement…

Percentage of an overall goal

Dealing in percentages is always a smart way of determining progress status.

Psychologically, percentages always make me feel like I’m making more progress than I actually am as well. If my goal was £100k, and I had saved £5k, looking at it as being 5% towards by goal for some reason feels a little more accomplished than the £5k/£100k would suggest.

You could take a small reward at each 5% marker reached or adapt it depending on how big your goal is.

Again, this will change person to person, the size of the goal and the amount the individual can save. Someone with a goal of £500k, but only able to save a few hundred a month is going to take longer to reach a 5% mini-goal than someone able to save £1k+ a month.

Numerical value of an overall goal

Pretty simple one. You could reward yourself each time you save an actual chunk of money.

Ignoring how much closer that amount gets you towards your goal this one focuses more on the value of the amount saved rather than the percentage of the goal achieved, like the above.

This could also include rewarding once you hit certain amounts on the way to the overall i.e every £Xs saved.

Net positive months

This could be one more for those only able to save smaller amounts.

This doesn’t deal in percentages or value of the amount saved, but is more concerned with at least saving something month on month.

You could reward yourself after increasing your savings pots after a certain amount of months in a row.

Whether that’s £50 or £500, as long as you come out in the black each month, that could count towards your monthly positive streak towards your mini-goal.

These are just a few general suggestions but they can be adapted to however you need to allow yourself the small motivators on the way to your larger goal.

Remember you want these to be manageable but also mean something and not be too easy to achieve.

The value you attribute to the reward also needs to not take away too much from the savings pot you’re saving up. for example, if you hit a £10k savings goal for a deposit on a house, rewarding yourself a new £10k car is going to completely nullify the point in your savings goal in the first place.

Whatever your goals it’s important to be prepared to be in it for the long-haul, but also aware that small victories, and small rewards, are just as important to stay the course and not become disheartened.

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