You've probably heard that "a man's reach should exceed his grasp, or what's a heaven for?" But one definition of hell may be goals that are forever out of reach.
If you keep trying to fix your money and failing, the problem may be that you're aiming too high. Overly ambitious goals can be discouraging if you're forever falling short.
Most of us have more demands on our money than we have money, and so we have to juggle to make sure our financial bases are covered. That makes it tough to achieve truly lofty goals, such as early retirement or a 100% debt-free life.
Add to that the new realities of investing and the economy, where you can't count on steady returns or raises to speed you to your goals, and your frustrations are multiplied.
Consider moving the goal posts closer to your current reality. You're more likely to stay motivated if victory is in sight, and your initial wins may inspire you to keep reaching.
Dealing with debt
Original goal: Be 100% debt-free.New goal: Pay off all toxic debt.
Here's why: Not all loans are created equal. While credit cards and payday loans are toxic debts that erode your financial security, low-rate mortgages and student loans are generally considered good debt because they help you get ahead. So it's OK not to rush to pay off those good loans, but you'll want to attack your credit cards and other high-rate debts. For more, read "6 steps to dumping toxic debt."
How you pay off your toxic debt is less important than that you pay it off, but consider tackling one or two small debts first to give you the psychological boost you need to keep going. (Read "A debt payoff plan that works.")
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Building a safety cushion
Original goal: Have a three- to six-month emergency fund.New goal: Start with $500.
Here's why: A fat emergency fund helps you cope with financial setbacks and allows you to sleep better at night. The usual advice is that you need to save the equivalent of three to six months' worth of expenses. Unfortunately, building that big a fund can take years, and it usually needs to take a back seat to saving for retirement and paying off toxic debt.
Video: Embracing a budgetThe good news is that you can get significant benefits from a much smaller kitty. Research has shown that having just $500 in the bank can reduce anxiety, sleeplessness and bounced-check fees, as I wrote in "Want to sleep better? Save $500." Once you've got that saved, your next goal can be saving one month's worth of your "must have" expenses -- expenses that you couldn't easily delay or trim, such as mortgage or rent, basic groceries, utilities, insurance and child care. For more on how to identify your must-haves and create a budget that works, read "How much should you spend on . . ."
Saving for college
Original goal: Pay for your kid's college education.New goal: Pay for one-third to one-half of a public school education.
Here's why: College costs continue to rise faster than inflation. If you wanted to pay the full cost of a newborn's education at a private university, you would need to set aside more than $600 a month, starting the day he or she was born, according to a college cost calculator at Savingforcollege.com. (To cover Harvard and other top schools, you would need to save more than $1,200 a month.) Because most families can't set aside that much, a better goal is to save for part of a public school education. To pay half the cost of a public university that costs $18,000 a year today, a parent would need to save $217 a month for a newborn, $263 for a 5-year-old or $349 for a 10-year-old (assuming a 6% annual increase in college costs).
If financial aid doesn't fill the gap, student loans and parental loans can. For more, read "An insider's guide to student loans."
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