If you only ever think about your financial goals when it's time to make a New Year's resolution, you may want to switch things up a bit. It may be time to get serious about personal finance and goal setting- for real this time.
It might sound completely contrary, but sometimes when we have constraints, we feel more liberated. No other area of life demonstrates this more clearly than personal finance. Turn your constraints into financial goals and you'll feel a weight lifted from your psyche that results in a feeling of unparalleled freedom and power.
How does all this work? Here's a quick breakdown of how financial goal-setting can actually result in those wonderful feelings of liberation and power.
Not Taking Stock of Your Spending Makes You a Slave
One of the ways we reward ourselves for working hard at our jobs is to buy "me-gifts". You worked hard, don't you deserve to have nice clothes? A nice car? Why should you have an ugly kitchen, come to think of it… after all, you deserve the best for working all the time.
Those sentiments probably ring true on some level or another for everyone. Whether you treat yourself in small ways (organic veggies) or big ways (fancy travel), the concept is the same: you deserve it.
But can you afford it? There's really no way to know unless you track your expenses to get a grip on your personal finances. Knowing what's coming in is easy: you know your salary, you look at your paycheck. But the outflow is often where most people get lost. Without knowing this vital information, we're simply slaves to our spending. We work to spend, we spend more and more, and that's it.
Financial Ignorance Produces Stress
You may make tons of money and always have money in the bank, but without hard evidence of your spending habits, you'll never really know if you could be doing better. Who knows, you may be slowly leaking money.
That sort of uncertainty means there's a noose around your neck: stress. It's a slow-burning undercurrent of worry that eats away at your inner peace, but nevertheless it's important to relieve yourself of it.
If this describes you, start with the simple financial goal of tracking your spending. If you can figure out where you stand, you'll sleep better at night. That's “control”.
Control is Power, and Power is Freedom
Knowing how you spend your money is often the first step towards creating a good financial plan. A "plan" might sound limiting to you: budgets, a goal to work towards, sacrifices, etc… how could all that be liberating and awesome?
Think of it this way: do you enjoy worrying about how you'll dig yourself out of debt? Or do you ever wonder how you'll save up enough money to buy a home? Or if you have kids, do you worry they won't be able to afford college? Of if you're a big spender, do you sometimes feel that you just never ever have enough money, no matter how much you make?
Again: worries. And like we just said: worry = stress. Wouldn't you feel better knowing that you're doing something about all those worries?
Setting goals inherently means you've taken stock of your finances. Once you do that, you'll be able to set higher goals to reign in spending, save for the future, or whatever other items you set in your own little financial plan. That requires control, and it eventually leads to power over your own destiny. Cool!
Instead of ignoring your future, work for it by setting financial goals. That way, you can live in the moment without that niggling little feeling that you're wasting your future child's college money on some Jimmy Choos or a never-ending string of mocha lattes, mojitos, and takeout.
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Timothy J. LaPean, CFP®, ADPA® is the owner of Thoughtful Financial Planning, a fee-only financial planning firm located in Minneapolis, Minnesota. Thoughtful Financial Planning specializes in helping women, members of the LGBTQ community, and the people who love them manage the financial side of living a more fulfilling life. Timothy and I became friends through the XY Planning Network (a group oflike-minded, fee-only planners who work with Generation X and Y clients) and I asked him to write some thoughts on setting financial goalsas a guest topic for this site. |
Timothy LaPean | Thoughtful Financial Planning