Why is it that most people plan thoughtfully for life goals but seem to push to the side their financial planning goals? This is a question that has confused me for years. It’s like people are programmed to fall short on financial matters. Then I realized that most people actually are programmed to fall short on financial matters. For instance, think back to your time in school. Do you remember learning about budgeting your finances and investments or how to start and operate a business? I would venture to say most likely not. We were taught how to dissect a frog and label its intestines not to mention a score of other things unrelated to money. With that said, we need to learn how to develop the right money habits to achieve financial freedom. I’d like to cover a few of those with you now.
First of all, have a budget. This is a simple solution to a lot of financial problems out there. However, most people live without one and that includes the affluent. I would recommend you do a review of your most recent bank statement or use some type of computer program either online or one you can purchase to help categorize your spending more efficiently. Once completed, most people are literally mystified by how they spent their money. This would be a great start to prioritize your expenses and start saving.
Next, distinguish your needs from desires. This usually is a hard sell because we are all emotionally driven when it comes to our purchase decisions. Ask yourself this question next time, “Do I need this item or do I just want it?” If you get in the habit of asking good questions you’ll save a lot over the course of the year and be much better off for it.
Also, you must learn the difference between good debt and bad debt. Some experts say that no debt is the only way. However, not everyone can do that. That’s why it’s important to make good decisions with debt. The basic rule is this; a bad debt is an item or good that will depreciate in value such as a vacation you can’t afford, a more expensive car, or basic extracurricular activities you use your credit card for. A good debt is something like a mortgage, business loan, or student loan. If used for the right reasons, these kinds of debts could be referred to as “investment debts” because they are meant to add long term value down the road.
And lastly for this article, start to set financial goals and take them seriously. When people educate themselves about money, they start to see how the financial world works and begin to see their own potential in it. Ideally, they’ll align themselves with a financial advisor who can help guide them along the way and provide them a shared commitment to wealth building. If you haven’t made such a commitment, then today is as good as any to make that happen.
