Tag: self discipline

It’s all about what you want

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.

An Attitude for Change

Changing your money behavior so that you can win long term may not be as difficult as you think.

It requires accepting a few basic premises:

  • I can give up something I want now in order to achieve a more important goal later.

Many of us have allowed the marketers of the world to weaken our self-discipline muscle. Some poor souls among us have never been forced to exercise it, not even as children. We have to find this muscle and strengthen it. The same “I want it and I want it NOW” thinking that has caused us not to win with our finances in the past, will undermine our transformation if we allow it. “Later” is a word we need to embrace.

  • Lots of little victories can add up to a big win.

Most people are far less successful financially than they could be, simply because they are unintentional with their money. We can achieve our goals by making lots of small changes in our lifestyle. Quit hoping for the one big win and start collecting small victories.

  • Most people (not you!) are financial losers.

Once you’re on a plan you may find “everyone” around you goes out to eat anytime they want. They also drive cool cars and take great vacations. You’ll have to remind yourself that despite their appearance, most of these people are broke. They are deep in credit card debt; they don’t have an adequate emergency fund; they aren’t saving for their children’s education or for their own retirement. In other words they are not who you want to be.

If you can accept these premises, there is no reason for your financial transformation to be painful.