Picture this: It’s time for a holiday, time to get out of this place and get some serious R&R for a few weeks. You pack up the car, give the kids every known electronic gadget and head out. A few minutes later, when everyone is settled, you pull out the GPS and stare at the screen. Nothing shows up. You’ve set everything in motion, you’re on your way but you have no idea where you’re going. No problem, you’re definitely up for an adventure. You punch in “Don’t Know” as your destination into Google maps. It pops up a tavern in Maryland. Hmm, not quite what you had in mind. So you try a few other options:
- “Nowhere” – gets you to a gay bar in New York.
- “Unknown” – lands you at a comic book store in North Carolina.
You get the idea. And by the way, that’s really what you get when you punch those destinations into Google.
It would be unusual to hop into your car without any idea where you’re going. If you’re 21 and you’re off for an adventure of the “let’s see where this takes me” variety then fantastic. Otherwise, who knows where you’ll end up. Generally speaking, when you hop into your car or on a train or on a plane, you know where you’re headed. There may be many ways to get there but the final destination is fixed.
So my question is this: Why do so many people plan their holidays and their daily travels so carefully and yet have no plan when it comes to their money?
We’re all busy and in the absence of a plan, we do the best we can by paying bills and saving some cash here and there. The problem is that the end result for far too many people leaves a lot to be desired.
Sobering stats
Here are a few stats to think about:
- Nearly half of North Americans live pay cheque to pay cheque – Times, March 2014
- Theresa Ghilarducci, a professor of economics at the New School for Social Research, estimates that 75% of Americans nearing retirement in 2010 had less than $30,000 in their retirement accounts – “The Greatest Retirement Crisis In American History”, Forbes, March 2013
- 65-Year-Olds’ Financial Outcome After 40 Years Of Hard Work: 1% are wealthy, 4% are financially independent, 5% are still working, 54% are broke, 36% are dead – Enriched Academy.
If you leave your financial destination up to chance you’re probably not going to like the result. It takes a plan. But where do you start?
In my last post I tackled the idea of budgeting and why working backwards to zero might not get you where you want to go. As part of that discussion I presented eight steps to the money plan that I teach. So, the big question is, what’s the very first step to ensuring that you’ll like where you end up?
Start with the goal in mind
I’m not talking about a number here; I’m referring to the kind of life that you want or the position that you desire. It can be a huge goal like “I want to be able to travel anywhere I want, any time I want, for as long as I want with no thought about money.” Or you can start with something much more modest like “I want to be debt-free.” Do you want to be able to pay for your kids’ higher education? Then put that in there. Or maybe you want to spend your days golfing or creating art. The idea here is that the goal needs to resonate with you.
If big goals scare you for now, then start with smaller goals. Just set a goal. Any goal, however small, is better than no goal. If you’re not sure what you should use as a goal, here are a few questions to start the creative process:
- What is the biggest source of pain or frustration in my life right now? (i.e. no time, not enough money to pay bills, too much debt, can’t afford to have fun, no security, etc)
- What would my life look and feel like if this weren’t an issue?
- What could I do to move towards that desired state?
Tackle debt
If you have any kind of non-productive debt – that is, debt that does not put money back into your pocket – then a great place to start with respect to goals is to be debt-free. The kind of debt you want to get rid of and keep out of your life is any credit card debt and other consumer debts in the forms of loans or lines of credit. Learning to spend less than you earn is a necessary step to becoming financially strong.
I’ll discuss the whole issue of debt in a later post, but for now let’s just say that you’ve managed to get rid of all corrosive debt in your life and you’re wondering what the next step is. You think about where you’d like to end up and you decide that you want to be completely secure no matter what. In addition, you want to have enough money to enjoy life by travelling a bit, helping out your kids and taking more holidays. You then need to ask yourself the following question: How much money would it take for me to be able to live that sort of lifestyle and what kinds of protective mechanisms would need to be in place?
Financial protection
In this scenario you’d review your life insurance to ensure that your policy is up-to-date and sufficient, you’d ensure that you and your partner have a valid will, you’d put in place a buffer account with three to six months of savings for the “what if’s” and finally you’d evaluate your investment plan to ensure that you end up with enough cash flow to live the lifestyle you want. The time-frame for your investments depends entirely on how quickly you want to reach your goal.
Regardless of the goal, the idea is to take the desired outcome and work backwards to determine which steps you need to take in what time frame. If you have a goal but you have no clue how to work backwards to set up a step-by-step plan, then reach out to an expert for help or go digging online. There is an abundance of free resources available on the internet. Establish a clear question and go searching for the answer. If you persist with a clear vision of the question you need answered, you will find the answer.
One of the dangers of working with goals in this way is that we avoid the whole process because we can’t imagine how we’ll get there. The goals may seem unattainable or “unrealistic”. I faced this problem after the death of my husband when the mountain of debt seemed insurmountable. I then read two brilliant quotes by the late Debbie Ford that helped me to get unstuck.
“All you have to do is resign as General Manager of the Universe.”
“Remember, all the answers you need are inside of you; you only have to become quiet enough to hear them.”
In other words, don’t get stuck in the “how”; just establish your “why” and let the Universe help you out with the “how”. If you focus hard enough on the “why”, the “how” will fall into place. This does not mean that you can put up your legs, think happy thoughts, sip cappuccino all day and everything will work out. You do need to get moving and do something. Just don’t get stuck in the details. Make the best decision you can at that moment, reach out for help, seek the answers and keep moving forward one step at a time. Every time you wonder if your next move is the right one, ask yourself a simple question: Will this take me closer or further away from my goals? Then act accordingly.
It’s important to understand that you will fail along the way. Expect mistakes, shake them off, forgive yourself (yes, this matters a great deal) and adjust your course. People who succeed do so because they persevere through difficulties.
I have found that an important tool to keep me focused on my “why” is a vision board. The image that accompanies this post is the first vision board that I created. The interesting thing is that a few years later, when I looked at the individual elements, I found that I had achieved a lot of them. I also have written goals to back up the images. The way I look at it, you can never have too many reminders of the good things you want to achieve, create and attract into your life.
Give it a shot and don’t be afraid to aim high.
2 Responses
Good money management includes being able to pay your monthly bills, save for the future, and buy the things you need and want without creating unmanageable debt. You can master the skills of money control and learn to conserve your income by using knowledgeable spending.