It’s easy to complain when you don’t reach your goals, but it takes real commitment to figure out what you can do to improve your situation – and then to act on it. If you don’t, you’ll never get ahead, financially or otherwise.
Create a financial blueprint
When it comes to your finances, it’s hard to come up with a concrete, actionable plan useless you figure out where things stand right now and what you want to accomplish. Here are some questions to ask yourself:
- What is your current monthly income and expenses?
- What are your current debts and obligations?
- What are your goals? Be specific.
- How much money do you need to save to reach your goals?
Everyone needs to go through this process and create their own blueprint. If you can’t define what you want instead, as opposed to what others expect, you’ll end up chasing someone else’s dreams.
Focus on your frivolous spending
When people start to get focused on their finances, they often worry about their cash flow and wind up cutting their spending across the board. That’s not the best solution for most because it’s rarely sustainable. If you deprive yourself of too many things, you may go back to your old routine.
Before cutting expenses, examine the pros and cons of that decision. Cutting for the sake of cutting is a lot like acting busy at work without really accomplishing anything. Don’t focus on small meaningless tasks. Identify the important stuff and then go for it.
Look at your expenses and decide what really matters to you. Only cut luxury expenses on items and activities that aren’t important and keep spending on what you do love (as long as it’s within your monthly budget).
Find a financial mentor
One reason that Dave Ramsey‘s Financial Peace University is so successful is that it provides you with both information and a mentor. The importance of financial mentors cannot be overstated.
Some people may shy away from finding a financial mentor because they don’t want to look incompetent. In truth, seeking out a mentor is a sign of someone who wants to take their skills to the next level. It doesn’t have to be a formal relationship, and in many cases your mentors might not even know you’ve “adopted” them.
If you don’t know where to start, simply seek out people who are where you want to be, strike up a conversation, and start patterning your behaviors after theirs.
Your take
Do you have any tips for getting focused on your finances? What are your goals? What steps are you taking to reach them? And have you found a financial mentor?
During my application for a home loan I calculated my net worth. I now do a rough hand calculation of net worth every month to measure progress.
I also calculate my total finance cost each month and analyze what can be done to reduce this number. I include interest and any insurance premiums(PMI, car insurance on financed vehicles, etc)that would not be necessary if I owed less money. Paying off my truck and eliminating collision insurance was a substantial savings on top of the interest I was no longer paying.
Insurance cost is another hidden savings associated with purchasing a vehicle with cash. Save up some money and buy a 2-5 year old vehicle with cash up front, then use liability insurance and comprehensive if necessary. The savings are enormous when you put it all into the formula. Any decent vehicle should last 10 years these days.
The idea of an accountablity partner is the most important ingredient in my opinion.
Left to my own devices, I’ll fall back to my old ways. By simply having someone to be accountable to, I’m opening my self to new ideas.
BECOME ACCOUNTABLE TO SOMEONE…ANYONE
This may be a mentor but in my case it was my Wife
A mentor is a good idea even if you don’t know them. For example I read a financial book that I felt spoke to me directly and utilized it to get on track. In a way used that and a few emails to the author as a mentor.
Timely Topic for end of year, kudos Laura! I guess my comments would be “here is what can happen”…
If, you live within your means, follow simple math (e.g. drop the next best thing), make small steps (don’t let your spending rise with your earnings), and other common sense items (exercise, love, laugh, have faith, etc..)
Then one day,you wake up and you are quote “wealthy”, or at least to the IRS, Census Pols and politicians you are.
Perhaps my example of it really “does happen” and it takes “no special talent”. Then feel inspired to be one step close to your financial freedom this coming year.
-brought to you by a product of public education, who never did anything except keep trying.
People focus on that “keep spending on what you do love” before they focus on the savings portion. Automating your finances can go a long way toward financial freedom. If you sock away that money at the beginning of the month, you won’t be left wondering where you’ll find the money to put into savings at the end.
I’m going to assess my net worth before the end of 2009. This will give me the ‘full’ picture of what I owe vs what I own. I posted on this topic this week.