To successfully manage personal finances, we realized that reviewing our financial progress is as important as putting the plan on the paper. Like most businesses keep track of their inventory, personal finances calls for the same.
This helps you answer these questions:
Where are you financially?
You have to be true and honest to yourself. Are you in a hole? Are you in a ditch or cruising on a clear sky on a friday afternoon? I believe the best place to begin answering this question is by setting up a budget. A budget acts like a GPS that gives you a turn by turn direction of your finances.
When Esther and i made the decision to be debt free, we realized that we can have a budget on a piece of paper at the beginning of the month just because, or we can make a living budget that guides our spending getting us a step closer to getting out of debt.
What are your financial goals?
Once you identify where you are, set some financial goals and write them down. A lot of people make the mistake of keeping up with the Joneses, and so their financial plans are dictated by what the Joneses have or are planning to acquire. Big mistake! Personalize your goals, have short term and long term goals, and set deadlines for accomplishing these goals. Once you achieve your short-term goals set some new ones or by then, the long-term goals will have turned into short term. Financial Goals must be realistic, and must also reflect your financial position.
After being through the financial peace university series, we knew we were in debt but we made the choice to start the process of getting out of debt. We knew it was going to be a process but setting goals has helped to at least get closer to where we want to go.
Some of our short term financial goals were:
Pay off credit cards
Pay off car note
Some long term financial goals were:
Pay off student & misc loans
Fully funded emergency
Invest into a retirement savings account
What is the hindrance to your success?
If you have been on this route before you, it is important to identify and evaluate the obstacles that are hindering you from achieving your financial goals. Some of these obstacles do not totally hinder your progress, but they may slow you tremendously. Write them down.
What changes will you make moving forward?
Now that you know where you are, you know where you want to go and you also know what challenges you faced when you walked this path, it is the time to honestly prepare to make changes necessary for you to forge forward. When we started doing the budget together, we had an uneasy feeling about our money preferences, but we made the decision to be talking about money, we made a choice to be on the same page, and we made a choice be financially accountable to one another. We now appreciate our different perspective on money management and we work each day to make the differences work to our advantage.