Before you set any new financials goals, you need to ask yourself three questions: What do I want? Where am I now? What will I do to reach my goal?
Businesses usually have 5 and 10-year plans and they will revisit their plans yearly, quarterly, monthly and sometimes weekly when they have to make payroll, we should do the same thing in our personal finances. Our household finances are our personal economy and we should treat it as such. So ask yourself these three questions to get started:
- What do you want? Before you start making plans to “save money,” “get out of debt,” or “make more money” ask yourself how much (dollar amount) and ask yourself why. What is important about this goal? How will your life be different? When do you want to achieve this goal? Be specific on the amount, the reason why and your deadline. It’s your goal, be honest with yourself. Remember, a financial goal without a dollar and a date is a dream!
Tip: Write the goal and the amount down in a place you can see often.
- Where are you now? Look at your cash flow from the past year. How much money did you make? How much money did you spend? How much did you borrow? Review your paystubs, W2’s, 1099’s, Quickbooks, Quicken and see how much money you earned this past year. Next look at your bank statements, credit card statements, receipts and see where your money went. Are you in the red (more debt than cash in hand) or in the black (more cash/assets than debt). Do you notice any trends?
Tip: Take note of your behaviors that help you move toward your goal and those that take you off course, specifically “people, places and things.”
- What will you do to reach your goal? Create an action plan. Break your action steps down into bite size pieces. Will you start packing meals, redirect money to your savings or investment account from your paycheck, plan your entertainment, stop using credit for pleasure vs. investment? Start with no more than three things that you can and will do. Don’t overwhelm yourself, causing you not to get started or quit too soon. You may have to start doing something, stop doing something or reduce the frequency of something you do too often.
Tip: Write the three steps down and take one step immediately. Start today!
Don’t be afraid. Take your time to make your plan and do the work. If you need advice, seek it. If you need coaching or accountability, ask for it. You have to focus on what you want, so get to it! I’m here if you need me!