Finally, we get around to your favorite subject. Personal Finance is very personal. What you want and what I want may be quite different.
Winning with money is about using your earnings to get what you want from life.
As long as you are progressing toward your goals at a pace you are happy with, there is no need to feel guilty about lattes, dinners out or your fancy car. You should spend money in ways that make you happy. Just don’t make the two fundamental errors that will prevent you from winning.
Fundamental Error #1: Failing to set Personal Financial Goals
This was me, and I bet it is you too. To count, a goal has to be clearly defined, measurable and have a completion date attached.
I want to retire comfortable someday is not a goal; it is a Dream.
I want to retire with a monthly income of $2500 in six years. That’s a Goal.
I want to get out of debt – another Dream.
I want to be completely out of debt, excluding the house, within 36 months. – Goal.
I want to buy a house – Dream.
I want to save $20K for a down payment on a house by this time next year – Goal.
Ok, you’ve got it. Now take some of your dreams including your “great-big-won’t-happen-for-a-long-time-dreams” and turn them into goals.
Fundamental Error #2: Failing to have a plan
When people make error #2, their behavior does not align with their goal. It is not that they lack self discipline; it’s that they have no plan.
If your goal was, I want to save $20K for a down payment on a house by this time next year, how are you going to do this?
How much a month do you need to save? Do you need to cut back expenses to get there? Can you increase you income? How?
Break your goal down into the little actions required to get there; draw yourself a map. Put in on paper and then tell someone about it. Check back on your progress frequently.
Whether you are on baby step 1 or 7, you need to have a goal if you’re going to win.