Big financial changes are great, but they're not for everyone. Putting the family on a new budget, reducing large outlays, and contributing more to savings are all worthy goals, but what do you do if you've already achieved them -- or if the idea of a major change is just too stressful right now?
What you might need is a reduction and broadening of your expectations. Enter the 1% rule.
Sweat the small stuff
In explaining the secret sauce behind Great Britain's Olympic cycling success, performance director Dave Brailsford described how sweating the small stuff can make a big difference:
The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together... There's fitness and conditioning, of course, but there are other things that might seem on the periphery, like sleeping in the right position, having the same pillow when you are away and training in different places...They're tiny things but if you clump them together it makes a big difference.
The same thinking can be applied to your financial life. Instead of focusing solely on the major (and often intimidating) overhauls that can save you thousands of dollars per year but require a huge adjustment in your life, start small. I mean really small -- 1% small.
For now, don't stress yourself out thinking you need to double your IRA contribution. What about an extra $20? If you're spending too much on food, why not try bringing lunch to work once a week? If you want to monitor your spending, don't fret about doing it all the time. Why not try once per week instead?
In other words, don't worry about orchestrating a complete overhaul of your finances and becoming a paragon of fiscal virtue. Just take a little step here and a little step there. Do this everywhere you can, and pretty soon those little steps will add up -- and lead to bigger steps.
The importance of patience
Of course, in the cycling example we're talking about top athletes with a huge amount of success around them already -- and indeed, you won't be able to retire in Southern France with a $20 IRA contribution.
But for a lot of us, focusing on the big stuff can become paralyzing. For example, one early study on the subject found that performance-based goals combined with a low perception of ability led to negative feelings and "learned helplessness," which is essentially psychology-speak for "giving up."
Finance can easily produce these kinds of feelings if you become impatient with yourself and set expectations too high. But trying to get everything "right" is a recipe for missed expectations and demoralization. After all, it's frustrating to fall short of our vision of what "right" looks like.
Rather than trying to morph yourself into a crack investor, heroic penny-pinching saver, and expert shopper overnight, just aim for a bit of improvement from where you are today. That little bit might become quite satisfying, and as you get into the habit you'll maybe even find that you can build on it.
This is the financial equivalent of wanting to run a marathon and starting out by walking around the block. Keep doing it every day and adding on a little bit at a time, and pretty soon you'll be running 10Ks. Not long after that, you'll be a marathoner.
Much like compound interest, this strategy requires time to demonstrate its impact. But with a little bit of effort for that 1% and a little bit of commitment over time, you might just find that you can move mountains.
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