Gather Little by Little

Once you have recognized that your finances are out of control and walked away from the mirror, determined and focused to make a change, the next step to How to Get Your Finances Under Control is to set your financial goals. Goals are like destinations, they define where you are going and where you want to end up. How often do you leave home and not know where you are going? If you are like most people, you have one or more destinations in mind before you even walk out the front door. You know where you are going, and most likely have determined the most efficient route to your destinations in order to not waste time and gas.

Step 2 in Getting Your Finances under Control is all about setting your financial goals. Doing so will provide you direction on how to get where you want to be, will empower you to make decisions based on the goals, and serve as a constant reminder of why you going through these steps and the reward that lies at the end.

Find some time, a sheet of paper, a pen, and a nice quiet area to sit down and think through your life, your finances, your long term goals (retirement, where you want to live, etc.). Make a list of your top five financial goals. If you are married and going through this process as a couple, I strongly advise you make this list separately. This will avoid the group think syndrome and allow you each to come up with your own five personal financial goals.

My wife and I did the same exercise and here are our goals:

Mine:

1. Get rid of credit card debt
2. Payoff 401k loans
3. Payoff cars
4. Have at least 3 months of salary in savings
5. Buy home with some land

My Wife’s:

1. Payoff our credit cards
2. Payoff our loans
3. Save money to get some land and a home
4. Save as much as we can for the children’s education
5. Retire with my man

We had some items the same, and some items different, but no items that we disagreed on. After writing our lists, we spent some time that evening comparing our items, discussing why we listed each item, and why it was important to each of us. We had initially planned to merge the two lists together into one, but decided to keep them separate. Seeing her name above her goals somehow made me a little more focused to see her goals listed out.

These goals become the result of our financial plan and our constant reminder of why we were making the changes in our life we were. I typed our lists up on my laptop, and printed up wallet sized copies. I keep mine in my wallet right next to my cash. I also wrapped a copy around my debit card. Both of these serve as a constant reminder each time I go to spend money. They remind me to think twice before making a purchase, and force me to think about our goals every time I buy something.

One of the important aspects of your goals is they should be attainable and specific. The one’s we have above are not specific, but as we begin to work on each goal, we make it specific. For example, our current goal is to pay off our debit and loans. We have developed a budget and debt snowball that will have us completely out of debt except for our home in 3 years. The time line makes it specific, and the snowball makes it attainable.

So, take some time today, don’t wait and lay out your top five financial goals. If you are married, spend some time comparing your lists and discussing your goals with your spouse. Put copies of these goals in places where you will be constantly reminded of them. Place them in your wallet, on your refrigerator, in your car, in your checkbook, and any other place you will see them or where you will see them before you spend.

Next, we’ll develop a financial plan. I’ll give you a simple financial plan template that you can use to document your plan for attaining these goals. Once we have the plan in place, we’ll jump in and start the process.

The next article in this series is Step 3: Develop a personal financial plan.