The Power of Small Wins and Financial Independence

A couple of weeks ago, I was talking with a coworker of mine who is training for the Marine Corps Marathon that happens in Washington, DC every year. Our conversation went a little something like this:

Me: “How do you stay focused for so long? The reason I don’t run long distances is because I find training really boring. I would never be able to build up to that kind of distance.”

Coworker: “The only way to successfully run a marathon is to break the race up in your mind into 2-3 mile increments. Thinking of running 26 miles is so overwhelming, but running 10 2-3 mile segments is much easier. You maintain your excitement because you’re building on your successes of previous segments.”

Modest Steps Lead to Big Outcomes

There have been many studies and academic articles written about the impact of taking a seemingly daunting task and breaking it into more manageable parts. In an HBR article titled “Small Wins and Feeling Good”, the authors Amabile and Kramer write:

“Breaking … problems down into a series of more modest steps, all on the path to the ultimate goal, reduces fear, clarifies direction, and increases the probability of early successful outcomes”.

Fear: When problems seem too big to accomplish, particularly ones that can’t be avoided, fear can be an overwhelming feeling. The fear of loss, failure, or regret can overpower someone into inaction, which is often the worst of all possible actions. Turning a large task into lots of smaller, accomplishable problems limits the overwhelming sense of fear and spurns us into action.

Direction: In an interesting experiment, researchers asked hikers to hike in a straight line for several hours. Amazingly, all the walkers veered off course and some even circled back near to their starting point. However, it was the hikers who were unable to see the sun or moon because of overcast conditions who fared the worst. Smaller goals, like “follow the sun”, may not lead us in the most direct path to, but we can use them as checks to make sure we’re heading in the right direction.

Early Success: Motivation and success is like a snowball. Without small accomplishments along the way, we can quickly become unmotivated and feel like we’re getting nowhere. Achieving quick wins, however, provides us with confidence and renewed stamina to tackle the next, more challenging goal. For people who feed on their past successes, this can not only improve the possibility of achieving your goal, but a clearer, closer path to the finish line will motivate you to work harder and achieve it faster than originally planned.


Using Small Wins to Achieve Early Retirement

For many people, the goal of retiring with a $1M+ portfolio can seem so daunting and unachievable that they take steps that actively hurt their chances of reaching their goal. They don’t save in their 401k, or they spend money on unnecessary things like expensive cars or houses that are too big for them. However, by repositioning their goal of “retirement” into a set of smaller, more achievable goals that align with their overall objective, the problem becomes much easier to comprehend and achieve.


When I first calculated how much I thought I would need to retire early, I must admit that I too was a little overwhelmed. $2.5M for many people is a lifetime of savings, and I am trying to do it before I reach 45. However, as I thought about my values and the life I want to live both now and in retirement, I was able to think about smaller, more achievable goals for myself that put me on the right path.

  • Build a 6 month emergency fund: In The Emergency Fund: Insurance for Your Financial Life, I lay out the reason why an emergency fund is so important. Achieving this goal was a major priority for us so we already have our 6-months of savings set aside. Accomplished!
  • Save $150,000 for a house by September 2018: For the size and cost of houses that Mrs. NFF and I are looking to buy, $150,000 is quite a bit more than we need. However, we often find ourselves looking at older houses that might need a lot of work so there is a big cushion in that figure for the inevitable costs that come with older homes, like renovations, new roofs, etc. The last thing I want to do is spend all my cash on a down payment for a new home and not be able to afford to fix it up.
  • Save $8,000 per year for NFF Jr’s education: This is a new goal for me. I went through the same “Oh crap” moment when I looked at how much college could cost in 18 years. However, it is important to me that we provide an education to our children, and $8,000 per year invested at 8% should be enough to cover it.
  • Max out our 401k’s: While this alone won’t get us to our goal of $2.5M, with what we have saved so far, it gets us pretty close (assuming 8% returns over the next 15 years). If we stick to this goal, and find other savings and investing opportunities along the way, we may be able to reach our early retirement goal.

What are your retirement targets and what goals have you set for yourself along the way?

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