What I’m talking about is your financial mission for yourself and your family. No one starts a vacation without a destination. No one starts a military operation without a mission and objective. So why is it that so many of us go through life without a mission, objective or plan for our financial life? I don’t have an answer to that question, but I do have a solution.
First – The Mission.
Become financially secure for the rest of your life.
Second – Your Objectives.
Some financial planners call them goals, but they are the really the key points to drive you into action. The goals depend a bit on what your financial and family status might be, but how are these for starters?
Pay down your debt so you don’t have to pay exorbitant interest on credit cards.
Build up an emergency fund equal to at least three months of your emergency expenses.
Save enough so you won’t have a HUGE monthly payment for the new car or truck.
Save enough to cover the startup costs for your first house. (The GI Bill will let you buy without the down-payment, but you’ll still need some closing costs and furnishings, etc.)
Start to save in a tax-deferred account for the retirement years. (I know that’s a long way away. Starting early makes it a whole lot easier and the years will creep up on you.)
Start a college savings plan for yourself, your spouse, your family. (Chances are good that you’ll need one and the 529 College Savings Plans can be used for yourself or any relative. Just start now for yourself; it can be used later if you decide you don’t need it.)
Third – Gather and Analyze Your Data.
Collect every bit of information about every piece of financial resource. List them all – checking accounts, savings accounts, money market accounts, CDs, paychecks, etc. Sadly, you also need to do the same for what you owe – car loans, credit card loans, other bank loans, etc. You also need to have a really accurate handle on how you spend your money every month. That will be crucial for the next step. Once you’ve gathered the information, you can rack it and stack it and see where you stand and what resources you have to start on those goals.
You need to quantify your goals; put a dollar value on them.
Then compare that value to what you have.
Now you know where you want to go and how much ground to cover.
Fourth – Build Your Plan.
You probably can’t do everything at once; very few people have enough income to do that.
The first thing you must do is create a budget for your spending. If you haven’t saved enough or are in too much debt, it probably is because you are spending money you really can’t afford to spend. Unfortunately people often spend because they “deserve” something or really, really want it, even though they don’t have the income to support what they want. It’s usually time for a little self-imposed “tough love”. If those goals you set are really important, you may have to adjust how you live a bit. Your enemies are debt and the expenses you incur; they often have an advantage. Only a good operations plan that is followed can overcome that obstacle.
Pick off one important objective; one that is costing you money right now. Perhaps it is too much debt on credit cards; perhaps it is the lack of an emergency fund that forces you to use debt when unexpected expenses arise. After all, we all have them.
Focus on using the “space” you created with the budget to attacking that objective so you know when you will achieve success. It might take a couple of years, but paying off one of the credit cards might take a couple of months.
Start on the other goals in a small way just so you don’t ignore them. They can take top priority later.
Once you have a plan and start monitoring progress, you will feel a huge sense of accomplishment. Just like success on the battlefield, you will have achieved your first objective and will be ready to take on the next one. The Financial Planning Association’s website has helpful tools and resources to serve you.