Quit Spreading Yourself (And Your Money) Too Thin

by Paula Pant on · 10 comments

Want to save money? Focus­ing on ONE spe­cific goal can be more effec­tive than spread­ing your­self (and your money) too thin.

Con­ven­tional wis­dom says that the best way to save more money is by ear­mark­ing small amounts of money towards a wide gamut of goals.

For exam­ple, your monthly sav­ings might look like this:

  • My next car pur­chase — $75 per month
  • A “rainy day” fund — $100 per month
  • A down pay­ment on a house — $150 per month
  • A trip to Italy — $50 per month
  • A new dish­washer — $50 per month
  • Total Sav­ings — $425 per month

But this spread-yourself-too-thin strat­egy can be dis­heart­en­ing. After 1 year of sac­ri­fic­ing con­cert tick­ets, restau­rant meals and cute new clothes, you’ve only man­aged to save $600 towards that trip to Flo­rence and Rome. That won’t even buy your air­line ticket.

What’s wrong with this sav­ings strat­egy? Lack of focus.

(Now, a quick dis­claimer: I’m not say­ing this is a bad strat­egy. If it works for you — awe­some! This post is writ­ten for peo­ple who have tried this strat­egy, felt dis­heart­ened by their lack of progress, and — as a result — have given up on their dream trip to Italy.)

What’s the alter­na­tive? Focus on ONE goal at a time. Stop spread­ing your­self thin.

Here’s what that model would look like:

  • A “rainy day” fund: $425 per month

After 8 months, you’d reach your goal of a $3,400 “rainy day” fund, at which point you turn your com­plete, unadul­ter­ated focus to another goal.

You start putting $425 per month away for that trip to Italy. After 6 months, you have enough saved to go there.

When you return from Italy, you start focus­ing on the next goal: a new dish­washer. Within 1 month, you’ve got it.

Isn’t that more sat­is­fy­ing than spread­ing your goals too thin (and there­fore need­ing a longer time frame to reach those goals)?

This idea comes from the “snow­ball” method of pay­ing off your debt. It’s a the­ory that states that you should pay down your small­est debt first, regard­less of its inter­est rate. Focus all your money on just one spe­cific debt. Once that debt is repaid, focus all your money on the second-smallest debt. And so forth.

That the­ory has many crit­ics who argue that you’ll pay a lot more in inter­est by focus­ing on your small­est debt, rather than your highest-interest debt. But its sup­port­ers say that focus­ing on one small goal at a time is more effec­tive than spread­ing your­self too thin.

The hyper-focused method may (or may not) be the best method for repay­ing debt — but it’s cer­tainly a great way to save for a goal.

by Paula Pant

Thanks to wise money man­ag­ing, Paula Pant has trav­eled to 27 coun­tries, pur­chased a 99-year-old Vic­to­rian home near cen­tral Atlanta’s most beau­ti­ful park, and has never — ever — had a penny in debt. Her blog, Afford Any­thing, is based on one rad­i­cal idea: money should never hin­der your dreams.
Paula Pant
View all posts by Paula Pant

{ 10 comments… read them below or add one }

Steven | The Emotion Machine January 16, 2012 at 9:03 am

Interesting ideas. I think the more you can save per month the better. Put some of it in an emergency fund, some in a retirement fund, and some in a vacation/leisure fund. I read a recent statistic that most Americans wouldn’t be able to gather an emergency $2,000 within a week. This tells me a lot of Americans aren’t saving their money wisely. We need to go back to a savings-based economy, no more excessive credit card use and debt. I like your approach to saving money in bigger amounts.
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Betsy at Zen Mama January 16, 2012 at 12:27 pm

I love this idea for “focus” ! I love to save money but often see it going towards other things instead of my life’s dreams.

I’ve been very inspired by all your recent posts here at Jungle of Life.
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Be January 17, 2012 at 4:15 am

I think a big plus of saving in the ‘snowball’ way is that it would also encourage us as we see goals being achieved in a relatively shorter term; thus spurring us on to the next goal. Nice post Paula :)
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rob white January 17, 2012 at 9:06 am

No matter which method we choose it boils down to coming to know ourselves. The Snowball effect seems like a powerful way to overcome the gravity of hesitation and procrastination. When we ask ourselves, “What if I could trust myself to act in ways that were always in my best interest – what new goals would I set?” we can begin to hear our own self-talk. Most folks come up with an incredible strategy for hesitating and procrastinating. There was a time when I thought that my discouraging self-talk offered good advice. It never occurred to me that I could live with a mind, untroubled by discouraging opinions.
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Inspiration To Live Well January 17, 2012 at 6:43 pm

Well any kind of plan is better than no plan! And having a partner on board with you and your plan is a big help. Focus helps. Kind of like the one at a time idea. Sandra
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Doug Gene January 18, 2012 at 2:41 pm

Thanks for the tip offs. Actually, this is not too different from my current saving techniques. Thanks for the post!
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Anna January 19, 2012 at 4:37 am

Why haven’t I thought of this? I just got one of my WOW and AHA moments now. You are so right about the importance of focus, but sometimes you really HAVE TO focus on several things at a time, like when you have to buy a new bed and a washing machine at the same time. In this case the more money you can save, the best it is. Of course you can always prioritize!
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Noel January 21, 2012 at 8:35 am

Jason was pinpointing that focus is the main ingredient for success and Paula you showed us that this works for financial matters too. I’m happy to learned that and although some might think diversify is better but I like your suggestion more- it’s a great idea!
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Jen January 21, 2012 at 10:34 am

I like this idea about ONE thing at a time! It also feels good, kind of like life goals…when you put your efforts into focus and have that awesome sense of ACCOMPLISHING something, rather than chasing too many things at once and ending up disheartened and frustrated!
Thanks for a great read!
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Andrew Walker March 8, 2012 at 10:28 am

You know, I’ve got a friend who’s been thinking of asking his girlfriend to marry him. So he’s working really hard, while trying to save a lot of money as he can. And I gotta say, I’m a kind of impressed with his effort there.
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