When deciding which goals to focus on, it helps to know which ones aren’t a priority. Warren Buffett did this by creating a list of goals, then picking the most important ones for a second list.
Photo by Aaron Friedman
It's a classic Buffett story. He asked his pilot, Steve, to create a list of 25 things he wanted to accomplish in life. Then, he instructed Steve to pick the five most important ones. Buffett then told him: "Everything you didn't circle just became your 'avoid at all cost list.' No matter what, these things get no attention from you until you've succeeded with your top five."
It's a great lesson for focusing on goals, but it can just as easily apply to your finances. The Simple Dollar's Trent Hamm explains how our "list of important things" can get longer and longer without our realising it:
Let's say that for a while you became very focused on the food you eat. You started being incredibly selective at the store, picking out only the highest quality items...Before long, you're used to eating high quality foods like this. The other cheeses don't taste as sharp. The other eggs don't taste as rich.
After a while, though, you begin to care less about food...You stop visiting those foodie websites and start focusing on other things.
Yet, when you're at the store, those expensive foods keep going into your cart. Just because your focus is elsewhere doesn't mean that your spending on that less-focused area goes down. It just means that you're juggling one more expensive ball in your everyday life.
Basically, you start to mindlessly spend on things you no longer care about. The remedy? Use Buffett's "two-list" method. Make a list of all of your expenses. Hamm suggests taking a moment to think about the list items that matter most to you, then plan your finances accordingly.
He offers a lot more detailed insight on the topic. Be sure to check out his full post.
Warren Buffett's Two Lists and Your Money [The Simple Dollar]