Do you have a plan for your money?
If you dream of achieving financial abundance, that’s the most important question you can ask yourself.
When I was younger I indulged in consumerism, spending without a plan. Not giving much thought about money goals, I drifted financially.
Aimless spending led me to purchase a new car when I really didn’t need one. I rented an apartment that I clearly could not afford and purchased the latest and greatest electronic gear because I wanted to.
My reward for not having a plan: massive credit card debt that took me nearly a decade to pay off.
We all get side-tracked, chasing shiny consumer distractions, which divert financial energy from what’s really important to us.
Those who fail to plan, plan to fail
I always tell people to control your money so that your money doesn’t control you. That begins with having a plan. Without one, you’re toast. So where do you start?
1) First, sit down and have an honest discussion with your partner
Determine what’s truly important to you. Hash out your financial goals. Do you have debt you want to pay off? Do you want to travel more? Is a home in your future? What type of retirement do you desire? Are you going to save for your child’s college education?
2) Now, write down your money goals.
Studies show that we’re more likely to stick to our goals if we put them in writing. Don’t forget to place a price tag on each one of your goals.
3) Finally, make your financial goals your first priority by working them into a budget.
Consider the 50/30/20 spending plan. It encourages you to do the following:
Budget 50 percent of your net income on “needs,” including transportation, rent/mortgage, groceries and health insurance.
Budget 30 percent of your net income on “wants,” including your smart phones, clothing beyond the basics and cable TV. This is where the money for your short term priorities should come from. By dedicating 30 percent of your income to “wants,” it forces you to make compromises. If your goal is to take a vacation, for instance, you may have to cut back on the number of nights you dine out.
Budget 20 percent of your net income on debt repayment and long-term savings. This is where your long-term goals come into play. Use this percentage of your income to fund your retirement account, place a down payment on a new home or save for your child’s college education.
By developing a plan for your money you’ll avoid drifting aimlessly into the financial hinterlands. Instead, you’ll be able race toward your financial goals with confidence.
BMWK, how are you setting yourself up for financial success and independence?