Establish Goals to Prevent Financial Chaos
I get many emails from people who are overwhelmed with their finances. Either they don’t know where to begin or they’ve tried to take on too much or they’ve been chugging along for months and feel like they’re getting nowhere. At some point between the financial chaos, they decide to contact me.
I can not give you financial advice. And I’m the last person you should ask for investment advice. Why? Because I’m not qualified. This is why I only blog about my own financial life instead of providing information as if I’m an authority. Somewhere along the way, I hope you will pick up something that is useful to you.
Besides, personal finance is a complex matter because it is intertwined with so many different areas of life. Most likely, if you ask me a question about your personal finance problem, my answer will almost always be some variation of “it depends.” So I’ve decided to share my overarching view of money management based on my own life.
No matter where I start, before I can make sense of my finances, I have to determine what my goals are, place them in order of priority, then focus my actions so that they are aligned with my goals. Without a clear destination, I’m likely to make decisions without a purpose and feel overwhelmed with the information overload.
As you’ve read for the past 4 years, my financial goals have been as follows:
- Debt freedom
- Emergency fund
- Retirement
- College savings
- Financial freedom
Based on that order of priority, I contributed the minimum to my e-fund and retirement, then focused all excess income on paying off debt. When my debt was paid, I focused all excess income on building my emergency fund (it was $10k to start). When my emergency fund was fully funded, I focused all excess income on maxing out my retirement accounts (IRS mandate – $16.5k 401k and $5k IRA). When I earned enough money to maximize my retirement accounts, I focused on saving a little to assist my daughter with her college expenses (min state tax deductible amount).
Throughout the process, I also focused on maximizing my income, reducing fixed expenses, and maintaining my nest egg(s). When my goals were met, then and only then did I consider investing in taxable accounts.
As I progressed, I established more challenging goals to ensure that I continue to make responsible financial decisions. All contributions towards my goals are put on auto pilot to avoid any excuse for not achieving them. I never have extra money to spend frivolously “because it’s there.” Every dime has a home. Whatever is left over, is meant for me to spend guilt free and enjoy life.
This blog is a personal account of my journey to become Healthy & Wealthy. If you like what you've read, feel free to subscribe via (feed reader) or (email) to follow along.
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Thank you for the practicality. That’s exactly what I am lacking…goals and a financial plan. Lord knows the balance of my debt reduction/credit improvement should be top of list, then e-fund, then retirement, etc.
I can certainly take this info and set goals for myself. I truly appreciate your time and care in responding!
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It seems so simple when you put it like that!
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My problem is staying focus. I’ll budget for a good two months and them something will happen and I’ll loss focus. I become overwhelmed and that’s it. I know I need to fight through, but haven’t. I know that I need more income and have been activity looking for new revenue streams, but they just haven’t materialized. I know it will get better, but until then I feel like I’m drowning. I want to be one of those who aren’t feeling the economic hardship. I guess I better buckle down and stay focus.
Thank you for all that you do…you provide hope for those we need to see that financial independency can be achieved. :)
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@ citygirl – it is simple, but simple doesn’t mean easy. Success in personal finance is more mental (perspective and determination) than financial (dollars and cents).
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@ Lechelle – I’ve learned that more income does not equate to better finances. We have to learn to manage the current income, because if not, then the increase will just be more to mismanage and spend. I learned this the hard way. :)
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Thank you for this post. It really put things into perspective for me!
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You’re absolutely right about financial sense being a state of mind rather than being “good with numbers”. Once you’re focused, it will lead to results. We’re nearly consumer debt free. This was a huge goal of ours. We had over $20,000 in debt and now we only have a about $300 left. This was done in about a year and a half. We’re really proud of ourselves. And, living within your means and honestly is the only insurance you have to save for the future and reach your goals.
Jerry
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Excellent post.
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Thank you for this post. It really put things into perspective for my future. Your blog inspires me, you wrote good topics and many readers were glad reading the content of your blog.
there are some good calculator which help in deciding finance. check out below link.thanks.
http://everyonereadit.com/best-of-personal-finance-41-financial-calculators-for-major-life-decisions/
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This post was right on time. I meant to increase my 401k percentage at the beginning of the month and forgot – I just went online and did it.
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I’ll raise the white flag, you’ve called me (and probably some others) out! LOL I never really thought of putting a goal in perspective when it comes to debt reduction (my #1 priority now). Since it’s a pretty big black diamond mountain (and I suck at skiing!), I’ll stick to the bunny slope and take my goals in six month increments – like for example – in 6 months, I want $X paid off or to have 10% of the debt paid off, etc. I think if I look at it in that perspective, things will be A LOT easier! Thanks for the post :)
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