The 5-4-3-2-1 Goal Setting Method, Applied to Financial Goals

I’m a big goal setter.

I find incredible value in having things in all areas of my life that I’m shooting for. Having goals gives me purpose with which to aim my efforts each day so that they build into something far greater than what I can achieve this afternoon or this week or this month. The process of making slow progress in a positive direction and witnessing changes as they’re happening and I’m moving toward things I want in life is invigorating.

I find financial goals, along with health-related goals, to be the most powerful of all, simply because progress on those kinds of goals is almost always progress that you never regret. You never regret having money in the bank, even if your goal changes. You never regret losing weight or getting in better shape, even if it’s not as central to your life any more.

The biggest obstacle I have in terms of making forward progress on goals is deeply understanding the connection between the seemingly small things I do today and the big goals I have for myself.

Take a dietary goal, for example. Let’s say my goal is to achieve my ideal BMI in some length of time – let’s make it a year. I need to lose some significant number of pounds to get there.

It’s easy to see what that big goal is, but that goal is far enough off on the horizon that it doesn’t seem really tangible. Like most people, my mind often defaults to looking ahead at the next few days.

Thus, when I’m making a decision regarding that goal, it’s often hard to directly relate a small choice today to that bigger goal. If I’m feeling a bit hungry and there’s a nice tempting sandwich just waiting for me, it’s really hard to see the connection between this 800 calorie sandwich and my goal of losing 50 pounds (or whatever). It takes consuming 3,500 calories less than I’m burning to lose a pound – that 800 calories is just a fraction of one pound. It feels insignificant next to that big goal, and I’m hungry, so I’ll go for the sandwich.

You can see the same thing in a financial goal. Let’s say your goal is to pay off all of your debts. You have $30,000 in student loans and credit card debts, with some of it having nasty interest rates.

You’re making a few extra payments on your credit cards, but you’re really tempted to buy some new decorations for your drab apartment. The decorations you want are only $35. You’re still going to make an extra payment this month… and the $35 is just a tiny sliver of a part of that overall goal. It won’t make a difference, right?

This is why big goals often don’t work. The goal you’re aiming for is often so big that the little actions you take each day don’t seem to connect to the big goal in any meaningful way. They feel like a drop in the bucket, one that doesn’t really matter.

So, what can you do about it?

One approach that works well for me is to stop worrying about the bucket and instead worry about putting drops in a thimble. Bear with me for a minute.

Let’s say that rather than worrying at all about that bucket, you’re focusing entirely on filling up a thimble with drops. That’s a much easier goal – you can fill up a thimble with just a few drops.

When that thimble is full, you empty it into a small cup. You can see the difference the contents of the thimble made in that cup – it’s making a real difference, and it won’t take too many thimbles to fill up that cup.

When that small cup is full, you pour it into a pot. You can see the difference that the contents of the cup made in the pot – it’s making a real difference, and it won’t take too many cups to fill up that pot.

When that pot is full, you pour it into the bucket. You can see the difference that the contents of the pot made in the bucket – it’s making a real difference, and it won’t take too many cups to fill up that pot.

If you can just fill up the thimble, it feels good. You can see the cup filling up.

When you manage to fill up a cup, that feels even better. You can see the pot filling up.

When you manage to fill up a pot, that feels incredible. You can see the bucket filling up.

And, soon, the bucket is full.

So, if you just focus on that dropper and make sure that the drops are getting into that thimble, you’re going to fill that thimble up real quick. Everything else from there is just a series of progressively larger successes that feel great when they happen, but you don’t really need to worry about them because they’re going to happen if you just fill up that thimble.

In other words, you’re creating a whole bunch of milestones for your big goal and just aiming for the next milestone. It’s like running a marathon and focusing on nothing else but the next quarter mile marker.

I like to call this approach the “breakdown” approach, or the 5-4-3-2-1 approach.

What’s 5-4-3-2-1?

The 5-4-3-2-1 approach is basically this concept of goal setting broken down into a simple meme so you can easily remember it.

Let’s say you have a big 5 year goal. Maybe you want to save up for a 20% down payment on a house. Maybe you want to turn an idea for a side business into something that can employ you full time. Maybe you want to pay off every drop of debt you have.

Whatever it is, it’s a big, aspirational goal.

The first question is… what can you do in the next 4 months to move that goal seriously forward? Maybe you can sell off a big collection you have that you don’t do anything with any more item by item to put money in your pocket. Maybe you can start creating episodes of your podcast and get your name out there in your target community on Twitter and Instagram.

The next question is… what can you do in the next 3 weeks to move that four month initiative seriously forward? Maybe you can build up a standard operating procedure for selling off the pieces of that collection so it’s easy to move them out. Maybe you can write and record the first episode of your podcast.

The next question is… what can you do in the next 2 days to move that three week initiative seriously forward? Maybe you can do an inventory of your collection by pulling out the 50 or 100 most valuable pieces and making a list of them. Maybe you can sign up for social media accounts for your new project, or outline the basic framework of your first podcast episode.

The last question is… what can you do in 1 hour today to move that two day initiative forward? Maybe you can simply figure out where the best place to sell your items is and what the best way to organize them for sale is. Maybe you can just sign up for a Twitter account and an Instagram account and join in a few conversations and follow a few people of interest that are small enough that they’ll engage you in conversation.

That’s it. 5 years. 4 months. 3 weeks. 2 days. 1 hour. 5-4-3-2-1.

Your drop is what you can achieve in an hour. What is literally the next thing you can do to start filling up that thimble? Those are your drops.

Your thimble is what you can achieve in two days. What can you do in two days that really moves your goal forward? You fill up that thimble, a drop at a time, with your immediate efforts.

Your cup is what you can achieve in three weeks.

Your pot is what you can achieve in four months.

Your bucket is what you can achieve in five years.

And when the bucket is full, you win.


A huge part of this strategy is refactoring. Refactoring simply means that each time you fulfill a part of the goal, you consider what the replacement piece is and what needs to be done under it to make it happen.

So, for example, each time you do an hour’s worth of effort toward your goal – filling up the thimble, in other words – you think for a moment about what the next hour needs to be to take you to your two day goal.

When you complete a two day goal, you stop and think for a moment about what your next two day goal is. Will this move me toward my three week goal? What one hour step or steps fit in nicely under this? Furthermore, does my current three week goal still make sense for me, given what I learned about the goal and what I learned about myself while completing it?

When you complete a three week goal, you stop and think for a moment about what your next three week goal is. Will this move me toward my four month goal? What two day steps fit in nicely under this? Furthermore, does my current four month goal still make sense for me, given what I learned about the goal and what I learned about myself while completing this piece of it?

When you complete a four month goal, you stop and think for a moment about what your next four month goal is. Will this move me toward my five year goal? What three week steps fit in nicely under this? Furthermore, does my current five year goal still make sense for me, given what I learned about the goal and what I learned about myself while completing this piece?

The thing is, as you go through those questions, you’ll see that your goal slightly morphs over time, changing with you as you change. This is hugely important, because it means that the big goal you’re aiming for remains relevant in your life even as your life undergoes gradual changes.

What about sudden changes? For the most part, the progress you’ve made toward goals that are focused on your health, your finances, and your transferable skills are ones that are still useful even when your life suddenly changes. Health is always good. Money in the bank always helps. Useful, employable skills always have value. A sudden life change may cause you to abandon a big goal, but you’ll almost always be happy with the progress you made toward a personal improvement goal.

The Dashboard

One of my favorite tools to use with this strategy is what I call “the dashboard.” It’s simply a document (I use a spreadsheet, but any digital document will do) that lists each level of a particular goal together in a meaningful way so that you can see them all at once and see how the little steps flow into the big ones.

For example, you might have a goal of saving for a down payment. Your dashboard might look like this…

Five years: Save $40K for down payment
+ Four months: Save $5K for down payment
++ Three weeks: Sell off contents of guest bedroom closet
+++ Two days: Sort through items in closet for sale
++++ One hour: Completely empty out closet and initially sort items

… or it might look like this at a different stage…

Five years: Save $40K for down payment
+ Four months: Cut housing and transportation costs by 50%
++ Three weeks: Move to less expensive apartment near work
+++ Two days: Visit three possible places to live
++++ One hour: Find ten potential apartments to look at

One detail I like to add is to use the finishing date for each goal. So, the above one might look like this:

December 1, 2022: Save $40K for down payment
+ October 1: Cut housing and transportation costs by 50%
++ July 30: Move to less expensive apartment near work
+++ Tomorrow: Visit three possible places to live
++++ Today: Find ten potential apartments to look at

That way, I have an immediate sense that the goals are really coming up and it’s instantly clear when things are due. Plus, it’s better to have a tangible date for your five year goal when you’re in year three of it rather than just continuing to call it your “five year goal.”

Debt Repayment: A Detailed Example

Let’s roll back to our earlier suggested goal of debt repayment. Let’s say you decide that you want to pay off your $40,000 in student loans and credit card debts by August 1, 2024. You’d start off with that as your five year goal:

August 1, 2024: Pay off all student loans and credit cards

What can you do in four months to start moving in that direction? Start brainstorming ideas. Maybe you could sell off your car and move to using a bike and mass transit? Maybe you could sell off all of the stuff you’ve accumulated that’s stuffed in your closet? Maybe you could move to a cheaper apartment? Maybe you could simply set yourself up for your next career move so that you can get paid more? All of those are great four month goals that lead right into that five year goal, so pick one:

+ November 1: Sell off your car and use mass transit for everything

You’re giving yourself some breathing room because this will require some experimentation and a few changes. What things need to be done? You need to get completely used to doing everything on mass transit. You’ll also have to figure out how to actually sell off the car and then make that happen. Time to pick a three week goal that leads you there… and it makes more sense to get used to mass transit first.

++ August 1: Figure out how to get everything done using a mass transit pass

This leads right into some sensible short term goals. In the next couple of days, you need to figure out the very basics of using mass transit daily:

+++ Tomorrow: Ride mass transit to and from work and also get groceries on mass transit

And the very first step down this path is a simple one:

++++ Today: Get a 30 day mass transit pass so that riding the train is easier

There: you have something on your to-do list for today that’s an actionable item and leads right into your other goals.

Now, let’s say you switch to using mass transit for almost everything when August 1 rolls around. It’s time to come up with another three week goal:

++ August 22: Put my car up for sale locally

What can you do to start getting ready for this?

+++ Tomorrow: Get the car cleaned outside and inside

And that gives you an action to take care of today:

++++ Today: Take the car to a car wash

Each day, you make sure that you have at least one task that takes at least a little time that moves you toward your goal. Maybe tomorrow, you finish cleaning up the inside of the car, so now it’s ready to sell. After that, you look into exactly how to sell a car locally. You figure out the details of your car, write a good listing for Craigslist and Facebook Marketplace, and put a For Sale sign in the window. You get calls, set up appointments, and get that thing sold by August 22… and then you’re onto figuring out how to handle corner cases with mass transit, like moving big items. Or, maybe you do that first and put off selling the car.

The point is that each day has a task to move you forward toward your big goal, one that makes sense as part of a chain of things that leads you there.

Final Thoughts

As I’ve mentioned before, I have a lot of goals going on at once, and I actually use a system very similar to this. Rather than the nice 5-4-3-2-1 mnemonic, I do the same breakdown but with 5 years, 1 year, 3 months, 1 month, 1 week, and 1 day. However, it doesn’t really have a catchy name for it (I call it “the pyramid,” but to each their own) so the 5-4-3-2-1 system is a lot catchier.

I usually have at least one goal for each of the nine major areas of my life going at the same time – physical, mental/spiritual, intellectual, marital, parental, social, professional, leisure, and financial. I try to have goals in each of those areas at once so that I always feel like I’m moving forward with my whole life.

These goals all use that same structural breakdown, all leading to things I can work on today to move things forward, and I have a weekly review where I think about each of the broader level goals a bit. I do a larger quarterly review and an even bigger annual review of my life, just so I’m sure I’m still on a page I’m happy with.

This system works well for me. It keeps me feeling like I’m always making progress toward being the complete person I want to be, a little better than I was before (but never even close to perfect).

I encourage you to give the 5-4-3-2-1 system a try. Make a list of the big five year goals you want to achieve in your life, then start breaking them down into smaller goals. You can use the 5 years – 4 months – 3 weeks – 2 days – 1 hour divisions if you’d like, or my own 5 years – 1 year – 3 months – 1 month – 1 week – 1 day divisions, or your own choice that works well for you. At the end of it, you should have a checklist of actions you can take right away, and that’s how you start filling your thimbles.

Good luck!

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.