In to look like if you.
Can’t sort of visualize it and set your heart on it then it can be very difficult to stay motivated and do the work and make the sacrifices to meet those goals I’ve struggled the saving for a very long time for a lot of reasons but one of the big ones is that I didn’t have any financial goals so actually identifying what my financial goals were has gone.
Keeping me motivated and focused to achieve them now I mentioned the importance of near-term financial goals and the reason I think.
Those are so important is that oftentimes our long-term financial goals can be very noble but also sort of unapproachable and lofty so say if our long-term financial goals are to save for retirement or save for a down.
Payment or pay off our house or sort of generally achieve the security that being financially free can.
Bring those are all great goals but if we’re nowhere near reaching those goals then it can be difficult to understand the first step towards achieving them so what I like to do instead is to have a general idea of where I want to end up and then take that idea and put it on the.
Back burner and instead ask myself what can I do in the next six months to three years to work toward that goal it could even be a much shorter timeline maybe it’s what can I do in the next week say if your goal is to start saving for.
Retirement but you don’t know how to approach that question.
Perhaps your goal for the next week could be to start researching 401k plans or IRAs or whatever sort of retirement savings vehicles are available to you I could talk for a long time about financial goals I have a.
Lot to say about them so maybe I’ll make another down the road specifically about financial goals but I think.
It’s important to understand where we.
Up and then have a series of new term goals to help us work towards them the next thing that I did was to calculate my net worth now calculating your net worth is something that people in financial circles recommend as a good have vegetable practice to sort of make sure you’re on track now what I heard about this I completely balked and thought why would I do that it’s going to be.
Negative so why bother and it can be really scary.
And in this age of rampant debt it likely will be negative but ignoring that doesn’t make it any better so I got out a spreadsheet and I listed out our debts and our assets and I chose to only list our liquid or cash assets because we didn’t really have anything that we wanted to sell but especially if you’re in.
A lot of debt and you would consider selling some things to negate some of that debt then go ahead and list out your non liquid assets but.
You list your debts and your assets and then you subtract your debts from your assets and you get your network wasn’t negative you betcha did.
It feel good nope but I still think it was a really good exercise because it gave us a.
Much clearer understanding of where we were actually at and it can also actually be motivating because over time you get to see that number improve it almost becomes a game and can help to keep you on target the next thing we did is something I thought I would never do we made a budget.
Now Technic with the whole point of a budget is to make sure we’re not spending more money than we make which is a good and valuable thing that budgets helped us to do but the reason I am now a converted fan of budgets is that they allow me to take on.
A more active role in deciding where we send our money before we started budgeting money came in and it just evaporated I can’t tell you where it went now we decide in advance where we.
Want our money to go and because of that were able to save a relative lot of it it’s not magic it’s decision.
Making and it’s being intentional before we started budgeting I spent money on a lot of mindless things if you followed my channel for really any length of time you’ll probably know that I don’t shop a lot in the sort of traditional sense of the word.
Of mindless purchases now we’re a lot more intentional and deliberate over where we send our sort of discretionary spending and you might think that sort of not having a lot of discretionary.
Spending would lower my quality of life but it actually hasn’t it’s actually improved it because now we’re spending and investing money where it matters we’re saving for experiences and our future another.
Financial best practice that.
We’ve adopted is to have an emergency fund now emergency funds are popularly discussed in financial circles because they are incredibly important and I think that there are really a sort of necessary counterbalance towards being able to.
Have and maintain a budget because expenses can be variable and emergencies happen I recently had to replace the battery and all four tires on my car and if we didn’t have an emergency fund in place then those expenses would have just gone on a credit card and become another source of debt so if you want to be able to stick to and maintain a budget I.
Think it’s really important to have an emergency fund to pay for those unforeseen events the next thing we started doing and something we continue to do is to aggressively pay off our debts and the particular.
Method that we’re using is something called the debt snowball now I had never heard of the debt snowball before reading the Total.
Money Makeover so maybe this is news to you too but the idea behind the debt snowball is that you list out your debts from.
Smallest to largest and then.
You pour everything you’ve got into paying off that smallest debt first of.
Course you make minimum payments on everything but then you really throw yourself into paying off that smallest debt once that debt is paid off you can then take all of the money that you were previously applying.
To the smallest debt and apply it to the next smallest debt and when that is paid off you can take all of that money and apply it to the third debt now this can have an incredibly compounding effect on your ability to pay down debts of course it kind of breaks down whenever you get into interest rate however so if your third largest debt is say on a credit.