On the last blog I wrote about declaring financial independence. I described financial independence as … the opportunity to pursue your life’s ambitions absent of the chains of financial obligations. I know that sounds like something we would all love to do, but is it really possible? Well, after years of working at it, I am closer than I have ever been. However, the thought of attaining financial independence would not have been possible for me without the sound advice of a trusted friend several years ago.
While he did not make millions off a bestseller, his advice was very similar to what I consider the most powerful habit in Stephen Covey’s classic book, "The 7 Habits of Highly Effective People," which is begin with the end in mind. Covey asserts that all things are created twice, first in the mind (mental) creation, and it is followed by the physical (actual) creation. I have found that principle is critically important whether you are business leader, an athlete, or a homemaker, visualizing your goal is the important first step to achieving your goal.
So, have you thought about your personal financial objectives besides just daydreaming lately? What is your personal "end in mind?" Do you know what you would need to do daily, weekly, or monthly to take the dream vacation to Disneyland, pay off your credit card, send the kids to college, save three months salary for an emergency, or retire early? If you have not taken the time to determine your personal "end in mind" do not worry, there is no time like the present to get started. It is important for you to decide what is most important to you …and even more important to write it down. The "mental" creation must be documented in a way that you will review it as you work to achieve your goals. If you are married or have a committed partner it is important to do this planning together.
There are many ways to accomplish this, but for my family it has always been a weekend away. We like to do our planning right after the first of the year and we always take a weekend in late January to review how we did on our goals over the last year and decide on our goals for next year. I think it is important to remove distractions so you can focus. So, depending on your personal situation, it might be a day at home with the phone turned off, a peaceful place like the coast, or a campground on the river. All you need is a paper and a pencil, and a desire to build a better future.
It is critically important to be honest with yourself and/or your partner about what is was most important. It might be the security of a savings account, the anticipation of a family vacation, paying off bills, or buying something new for your family. However, you will always find difficulties in achieving your goals if honesty is not part of the evaluation. After sitting down together and getting your wish list you need to prioritize the list. This process will surprisingly improve your relationship as you work together to set common goals and you agree on the sacrifices necessary to achieve your goals. It provides significantly better results (both personally and financially) than the normal decision making process of the "in store debate" and the "after store regrets!"
Now, just because you have written your goals down does not mean that all the work is done. The next step is to identify your current expenses and determine if/how you can make these new goals fit into your current spending plan. Some goals will take longer than others, but without a plan you might not ever reach your goal, or even worse, end up financing your dreams from your emergency savings or on a credit card.
On the next blog post I will talk about building a personal spending plan.
(Special Note: If you want to read ahead simply do a web search on personal spending plan and you will find that there are numerous resources available.)
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