Your Financial Roadmap: Where Do I Begin?

Taking control of your money and financial future can be completely overwhelming. Some would rather clean the bathroom before looking at their finances.  But the important thing is to start somewhere! Take action – even if it’s just entering your information into financial software that does most of the hard “scrubbing” for you.

The key is to start small and start early. Smart financial planning, early on, yields huge dividends later. For example, if instead of buying the latest iPod this year, you invested the $250 into the stock market, with a rate of return of 8-percent, by the time you retire in 30 years, you could have over $370,000! Now, how important is that new yearly iPod to you?

Ok, so we know we have to take control. But where to start?

Well, what makes you happy?

What do you think is going to make you happy in five, ten, and twenty years? Money doesn’t buy happiness, but it is one of the factors that will help you get to where you want to be. When setting a financial plan, you need to figure out the basics – what you are saving for, and why.

To better identify your goals, break down where you envision yourself in the following categories:

• Physical –  Where do you want to be living? What are your physical fitness goals?  What are some luxuries or extra things that would have great meaning for you? 
• Emotional – What will your family life be like? What are your hobbies? What will your social life (friends) look like?
• Spiritual – How important of a role will your spiritual well-being play in your life?  What things have deep meaning for you in life? 
• Mind – What are your career goals?  What do you want to do during retirement?   Is life-long learning important to you? 

You need to know your goals and have them clearly defined in order to progress with your plans.  The more specific you are with your goals, the more you can break them into achievable mini-goals.

(Side Note:  I have always wondered why people set goals to become a millionaire by age X (insert an age).  If you haven’t identified why you are saving, or what makes you happy,  then this one goal is futile.  What is the purpose of becoming a millionaire by that age?  If you know it, then work like crazy for it.  But if you are simply working for the substance of money alone, I’d have to say that 1) it will be hard to stay motivated or 2) you’ll end up like Ebenezer Scrooge.)

I had an accounting professor who earned his millions by his mid-thirties, but after a few years of playing golf everyday, he was bored stiff.  He ended up going back to his alma matter to teach accounting classes and donated his check back to the university.  Point of the story:  Know what the bigger picture is and purpose behind the money..

Once you’ve identified your goals, it’s that much easier to identify what kind of financial decisions you need to make to get you there.

Ok. Now that we have a general idea of your future goals, we can use this as the outline for your financial plan. Don’t panic! Financial plans are not as scary as they sound. It can be as simple as “bring lunch to work to avoid paying takeout prices”. Your financial goals will obviously change as you move throughout your life, so while you should be specific, allow yourself plenty of room in your planning process for change and development.

So, now let’s make a financial plan.