Sunday, July 14, 2013

Day #14 - Financial Goals (Part 3)

Setting financial goals can really be a difficult task. It costs so much to live and we seem to have so little control over our incomes. For many of us the goal is simply to survive. But some people seem to break out of the survival mode and really make a good living.

The point is this: having financial goals does not guarantee that we will be prosperous. But not having financial goals makes it almost certain that we will be on a financial treadmill for the rest of our lives – moving but going nowhere.

I have never taken any formal courses in finance, budgeting, business or investing. In fact most of what I have learned has come from failure. But I discovered that is never too late to get started with financial planning.

Like our other goals there are two basic ways to set financial goals. You can either start with those small steps that you can take immediately (example: saving one dollar a week) or you can start by projecting where you would like to be in three years (example: $3,000 saved). In the first approach the savings goal grows out of the small steps you plan to take – saving one dollar a week. That means that you will have fifty-two dollars saved in a year ($1.00 x 52 weeks). If that amount of savings does not satisfy you, then try $1.50 or $2.00. The objective is to have a concrete goal that is attainable. The second approach to a savings goal will back you into a plan. A goal to save $3,000 in three years means that you will have to save an average of $19.23 every week ($3,000/156 weeks). If you can save that much every week, then your goal is realistic. If you can save more, your goal can be increased.

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This level of specificity and planning is how we take control of our finances and our lives. Some people call this intentional living. Once we start living this way, we will find that goals become more clear and much more attainable.

It is tempting to immerse ourselves in economic analysis, reciting the evils of past injustices, lamenting the unfairness of various aspects of the economy and brooding over the tough challenges that we face today. I found that at the end of those exercises I was still faced with the reality of having to pay my rent and handle my other responsibilities. So I chose taking action over spouting philosophy and the results in my life have been rewarding. I am urging you to do the same. Sure – we must understand the systems that surround and influence us. But analysis and understanding do not pay the bills unless you are a professor paid to teach ideas! We each need a financial strategy that is built on financial goals that we must set for ourselves.

Action items:
1.     Make a list of all of your debts from the smallest to the largest.
2.     Set your debt reduction goals.
3.     Set a goal to have an emergency fund of at least $3,000 cash.

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