How managing small goals can make debt freedom a reality

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Q: During the pandemic my partner and I set a goal to become debt free. Because of the lockdowns we weren’t spending a lot of money, so we made good progress, in particular with our credit card debt. But now that life has been back to normal for a while, becoming debt free seems like a pipe dream. Rather than getting closer to our goal, we seem to be getting further and further away. And to make matters worse, we don’t even want to say the words “debt free” anymore because it just doesn’t seem realistic. What can you suggest? ~Aaron 

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A: During the pandemic lockdowns, many households were able to redirect their spending toward savings, providing an opportunity to reassess their financial goals and priorities. For those who had previously struggled to break free from the cycle of debt, the significant reduction in spending allowed them to pay down debt and increase their savings. However, as life returned to normal post-pandemic, so did regular spending habits, which for many — coupled with the sky-rocketing cost of living — meant the end of the extra funds available for debt repayment and savings.

Setting overly ambitious goals or ones that take too long to achieve can be discouraging. However, SMART goals can help us turn our hopes and dreams into reality. They provide a structured approach, so when circumstances change, instead of giving up, we can revise them before losing our motivation entirely. Here’s why SMART goals are effective and how to start setting them for your financial objectives.

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Take a debt-free goal one step at a time

Achieving debt freedom is a significant goal that requires dedication and effort, but it can often feel daunting. The idea of becoming debt free might seem so distant that it’s hard to visualize its day-to-day impact and stay motivated. From a goal-setting perspective, breaking down this big goal into smaller, more achievable steps can significantly boost your chances of success. While aiming for debt freedom might be your ultimate objective, it’s important to set yourself up for success by taking it one step at a time with ongoing, smaller checkpoints.

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The benefits of setting smaller goals

Setting smaller goals, whether for financial, fitness, or fun purposes, has several benefits over aiming for one large goal. They enhance your motivation by offering frequent rewards for following your plan. Seeing positive results regularly makes it easier to stay engaged in the process.

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Big goals can be incredibly overwhelming and demotivating. Consider setting a goal to run a marathon or pay off $35,000 in credit card debt — both can feel daunting when you focus on the end result. However, breaking these goals into smaller, manageable steps makes them seem much more achievable.

Small Payments Make It Easier to Pay Off Debt

Cultivating a sense of accomplishment is essential for sustaining long-term motivation. Progress toward a goal is rarely a straight path, and life’s unexpected challenges can disrupt our plans. This is particularly true for financial goals, where an unexpected car repair or lifestyle change can set back our debt repayment or savings efforts. Setting smaller goals provides the flexibility to adjust our plans when life happens, helping us stay on track without feeling like we’ve failed.

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Focusing on smaller goals enables us to concentrate on one step or task at a time. Our capacity for daily decision-making is limited, and decision fatigue can quickly set in. By setting scaled-down goals, we create clear, short-term targets that we can achieve efficiently, almost on autopilot. This efficiency spills over, helping us manage our time better, boosting our confidence, and reinforcing our belief in our ability to achieve larger goals.

Turning Resolutions Into Results

How positive feedback affects financial goals

When we create a positive feedback loop by focusing on smaller goals, it promotes ongoing success because, simply put, success feels rewarding. That’s why credit counsellors at non-profit organizations advise clients to set smaller, manageable goals. For instance, for clients dealing with overwhelming stress or anxiety about their financial situation, a small goal could be opening a new bank account that week to prevent losing control of their pay deposits due to offsets. Packing lunch one day next week instead of spending money to eat out every day could be another small goal, as could obtaining their free credit report within two weeks.

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It’s important to make even small goals SMART: specific, measurable, achievable, realistic, and time-bound. Clearly defining the goal, tracking progress, ensuring it’s feasible given the person’s situation, and setting a deadline all contribute to success. Achieving these micro goals can boost confidence and motivate someone to keep setting and tackling future ones.

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The next goal might involve tracking spending for the next seven days, emailing their dentist the following day to inquire about an outstanding balance, or contacting their HR department by the end of the week to check if they have benefits that will cover a specific expense for reimbursement. Our credit counsellors tailor their guidance based on what each client can realistically accomplish. As clients regain control of their financial situation, the goals can become more ambitious, helping them achieve their hopes and dreams more quickly.

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How to Stay Motivated When Paying Off Debt 

The bottom line on setting a goal to become debt free

Becoming debt free might be the light at the end of the tunnel, but that light — or even the tunnel — can be hard to find when struggling with the grind of living paycheque to paycheque. Sometimes the goal needs to be whatever will get you through the day or the week. Be kind to yourself as you determine how best to manage your financial situation. Take a step back, regroup, and adjust your goals to fit your current circumstances. When things improve, you can always revise your goals again. Pushing forward with big goals when your situation isn’t ideal can lead to unnecessary frustration and regret. Remember, Rome wasn’t built in a day. The best way to achieve big goals is to take small steps that eventually add up to the big results you desire.

Related reading: 

Ways to Save Money Toward a Goal Successfully

Most Effective Debt Consolidation Loans and Programs

4 Money Mistakes and How to Fix Them

Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.  

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