This is the first article in a series of how to plan your finances.
My colleague Bianca recently wrote a blog article. I loved Bianca’s article. It got me thinking, it may not be a bad idea to explain how to Live Your Life on Purpose and how that helps you plan your finances, the basic nuts and bolts. No matter your economic situation, this is important information that often times we are never taught. This lack of education is a source of frustration for me, and why we promote financial literacy in our local communities of Bedford, NH and Andover, MA.
Some of the how to’s are covered in this series. Don’t skip a step, each one builds on the next. I will cover this from start to finish in the next few blog posts.
Step One – Set a Solid Foundation on Which to Plan Your Finances
The first step in any endeavor is often the most important, don’t skip this step!
As Steven Covey (author of 7 Habits of Highly Successful People) famously noted, “start with the end in mind.” Why don’t we do this with money? We often think ‘I have this much money and credit, what can I do with it?’. We continue to do this as our income grows and we can borrow more money to purchase things. We find ourselves feeling like we can never “get ahead.” We feel like a hamster on a wheel, with a never-ending quest to get ahead or feel like we have our financial house in order. It doesn’t have to be this way. We can be the one in control, not the hamster desperately trying to keep up with his wheel.
Step one: start with exploring and recording what is most important to you. Do this with your significant other if you have one. Otherwise, you will be rowing the boat in different directions. This exercise can bring harmony to matters of money in a relationship.
Think Deeply About What is Important
Ask yourself or your partner, “What is important in my life/your life to you?” There are no criteria or limits to the responses. It can be personal values or attributes, the people you want to share time with, monetary goals, material things that you aspire to attain. Do not judge either your own or your partner’s responses, just record them on a piece of paper. Record your or your partner’s top 10 answers. Then go back and rank them. This can be difficult, as it requires us to think deeply about what is important to us.
To rank the items, repeat back the first two on the list and say “if you could only have; e.g. close relationships with your family or monetary success which would it be?” Then you take the one that was not chosen, and ask your partner to compare it to the third item on the list, i.e. “if you could only have monetary success or _________ which would it be?” Then, as the shampoo bottle states, ‘rinse and repeat’ until you have ranked all ten items.
Clean up the list, type it out or write it neatly. This is your or your partner’s core, what is most important to you or them. You will need this list to know what to aim for and how to plan your finances. We have to enter our destination into a GPS before we embark on our trip; Living Your Life on Purpose is no different. In fact, I would argue it is a heck of a lot more important than knowing how to get to the local restaurant! Without this list you will be the hamster on the wheel with no direction, putting your energy toward an unending, unsatisfying journey.