Small Changes, Big Impact

With December coming to an end, the new year is barreling towards us. This is when people look back at what’s passed, and make New Year’s Resolutions. Big resolutions are great, especially if you’re able to hang in there for the long haul until you reach it. I’ve set goals, big and small; some I reached, others I didn’t. What I have learned though, is that the impact of smaller goals or new year’s resolutions are often overlooked.

Setting Measurable Goals

Before we get get too far ahead, for any goal to work, big or small, there’s a few things that need to be clear. Setting a goal of say, I’ll go to the gym, I’ll eat out less, etc, is great in theory but quickly becomes meaningless in practice. Why? It’s too generic.

• No accountability. There’s no way to hold yourself accountable. You can decide what going to the gym means to you depending on how you feel that week.
• Cannot measure progress. There’s no way to know if you’re making progress or on track. Went to the gym twice on week 1, once week 2 and not all this week. Is that success? Could be. Depending.
• No motivation.  Reaching the end point is VERY dependent on keeping up motivation by seeing gradual progress or change. Can’t track progress, no motivation.
• Easy to make excuses. Don’t feel like going to the gym this week. That’s okay, still reaching my goal since I went last week. Maybe I’ll go next week.

So what do you need? A specific goal, with measurable results and a defined time frame or end.

So what does that look like? Let’s take eating out less in 2018 as an example. Great, totally achievable right? Well, you eat out three times a week and feel like you’re succeeding, cuz hey, you cooked for more than half a week. It’s a start. Or you might eat out twice that week but feel you failed since you didn’t cook all meals. Neither situation is ideal.

Contrast that with:

• We eat out 3 times a week and spend $100. In 2018 we’re going to eat healthier and spend less on take out by cooking at home.
• We’ll do this by eating out no more than once a week and spend $40 or less.
• We want this to be a lifestyle change so we’re going to do this all year.

All of a sudden, it takes only a few minutes any given week to see if you’re on track, teetering off the wagon… or maybe the wagon is long gone?

Great! So now that we have that out of the way…

What’s this business about small goals, big impact?

For some goals, like paying off debt, there’s no avoiding that it’s a BIG goal. But it’s often better to break that down into a chunk that will be accomplished within the year. Big goals are exciting! Smaller goals, like say, brown bagging your lunch to work is less exciting. It’s easy to dismiss small, incremental gains/wins because it’s not as exciting or dramatic. Right? Hold on a minute. Let’s play out that brown bagging your lunch example. Assuming you spend $5/day. I KNOW, what’s the chance of that, nothing cost that little.

Bear with me, assuming you spend $5/day, every work day, minus 15 work days we have for average vacation time in Canada. Replace that with spending $10/ week buying groceries for your lunches . What happens?

Year	Take out Cost	Brown Bag Cost	Savings	Invested Savings
1	$1190	$476	$714	$714
2	$2380	$952	$1428	$1471
3	$3570	$1428	$2142	$2273
4	$4760	$1904	$2856	$3123
5	$5950	$2380	$3570	$4025
6	$7140	$2856	$4284	$4980
7	$8330	$3332	$4998	$5993
8	$9520	$3808	$5712	$7067
9	$10710	$4284	$6426	$8205
10	$11900	$4760	$7140	$9411

With this modest example, the math, or numbers if you prefer, tell us a few things:

• Extra savings over one  year
• Snowball savings over 10 years
• Benefit of compound interest if invested over 10 years

Savings every year

An extra $714 can be saved EVERY year simply by purchasing lunch supplies at the grocery store. This can go towards a yearly expense you always struggle to pay (winter tires, car service), fast tracking emergency fund savings or half way saved for a new laptop or phone if that’s your thing!

That may not seem like much on the surface. But if you pay off debt or avoid putting new debt on a high interest credit vehicle, there’s additional savings of not incurring interest charges. Another way it starts adding up is if this is combined with one or two other small cost cutting goals.

Snowball effect of saving over 10 years

This is similar to the previous section but it can seem more impressive if you look at it long term. In 10 years, you’ll have saved $7,140. That’s without adding any extra cost cutting measures, compounding interest on the savings, or interest rate charges you’ve saved yourself over 10 years.

Investing with compound interest

If you’ve got all the monthly and adhoc expenses covered, you have no debt and an emergency fund, then you can invest it! Assuming average market historical return of 6%, you’ll have $9,411 in a decade; an extra $2,271 bonus savings. Kinda like when you were a kid and a toot ferry magically left money in exchange for your tooth. All for taking your lunch to work.

True Scope of Impact

At first glance, it’s very hard to see the full value or impact of  a change. For big goals, full benefit is often not known because of it’s sheer size; a big benefit is spotted so we stop looking. Smaller goals, well they’re smaller so they don’t get noticed or get a second glance. Then there’s the harder to measure or intangible benefits. Going back to taking your lunch to work example, if you scratch the surface a bit, here are some potential benefits:

• Extra money saved above and beyond by paying less interest charges
• Encouragement from paying some debt off faster or not incurring debt
• Debt occupying your thoughts less which frees you up to focus on other things which could add even more value
• Stress reduction from less debt, higher emergency fund or more to invest
• Better nutrition
• Better sleep
• Healthier resulting from less stress, better nutrition, good sleep and having more energy to stay active

Wow all of that? Potentially yes!

So what are your smaller goals and new years resolutions and their true scope of impact?