“Money is always eager and ready to work for anyone who is ready to employ it.” Idowu Koyenikan
I rarely meet people who are happy with their financial situation. I think this is partly because no one really knows what they “should” be spending and/or saving in order to create a sound financial future, and partly because so many of us are in denial about our situation that we’d rather not think about it!
Whether you’re on track for financial success, floundering a little, or floundering a lot, there’s one thing that you can be sure of. Wherever you are, whatever your situation, however good or however bad, there’s a good chance that you’re there because of your own choices and actions. If where you are, is not where you want to be then that may sound harsh but I don’t mean it to sound critical. I know firsthand that life throws curve balls and that not everything that shapes your financial situation is of your own making. However, I also know that the impact of those curve balls is far harder if you don’t make an effort to protect yourself. And the impact can last far longer than you might like if you don’t take ownership of your situation.
Often people avoid focusing on their finances because they don’t feel confident handling money or don’t know how to manage it. While there are great resources out there (many of them free), too many of us believe that managing money is hard (it’s not) or complicated (only if you want it to be), so we choose not to do it. As human beings, we’re hardwired for pleasure so we focus our energy on the things we enjoy and avoid the things that we don’t. When it comes to money this means we spend energy on finding ways to send our money out to work for other people (retailers, credit card companies and financial institutions) rather than reining it in and making it work for us.
Where do I stand?
If you’re not content with your financial situation and you want to change it, then the first step is to take a long, hard look at where you actually stand. Take an hour to figure out where you are, where you want to be and how you’re going to get there. Write down how much you have coming in each month and how much you have going out. Then, list all your debts (in order from smallest to largest), the interest rates you’re paying and the minimum payments due each month. This will give you a snapshot of your finances and give you something to compare yourself to 6 months/12 months/3 years/10 years down the road so that you can see how far you’ve come and how much progress you’ve made.
How did I get there?
This is the question that a lot of people find uncomfortable to consider but answering it is critical to your success. Without understanding the habits, beliefs and curve balls that helped carve your path, you’re setting yourself up for failure. Before you make a plan, you need to identify the habits and actions that helped create your current situation so you can understand the ways that you could boost or sabotage your own progress. If you’re in a positive financial situation, this means identifying what works and considering what else you could do to get to your goals quicker. If you’re not, then it means figuring out how you got off track and what new habits, information, and resources you need to move forward into a positive situation. Note that this is not an invitation to throw yourself a pity party and wallow in your misfortune or an opportunity to beat yourself up about all the poor choices and mistakes you’ve made in the past. The past is a place to learn from, not a place to live; all we can do is take the lessons and move on. We can’t change the past but we do want to take what we’ve learned from experience and use it to build a far better future.
What do I want?
The next step is to create a picture of what you’d like your financial situation to look like. You need to picture yourself in a financial stable and successful situation. This can be hard to do when you’re up to your neck in debt with no savings. However, it’s important to just let go of all the doubts, fears and skepticism. Allow your mind to spend some time thinking about what life would be like if you had your finances under control and could build a solid financial future for yourself. Ask yourself questions such as:
- How much money do I have coming in each month?
- Where do I live?
- How much do I save?
- How much is in my bank account?
- How much is in my retirement account? How much is in my contingency fund?
- How much do I give to others and which charities/organizations do I support?
Push aside the little voice in your head that suggests you’re being unrealistic/greedy/delusional and focus on finding reasons why you deserve to have that as your financial reality. Find examples of people who were where you are and got to where you want to be; then ask yourself how they did it and if it’s possible for you to do the same. (Hint: if they did it, you can too!).
Too often in life, we allow our fears, lack of understanding and past experiences to limit our dreams for the future. We choose to stay “comfortably uncomfortable” rather than risk failing in our pursuit of something better. However, when it comes to money, financial success doesn’t require us to be great at math or to have a huge interest in investments. The first step is simply to ignite a desire to create a better situation for ourselves and develop the discipline to pay ourselves first, live within our means, and to make sure that our money is working for us and not our favourite retailer.