By Trevor Hammond
Creating Your Best Money Year Ever in 2016.
One of the primary reasons many people do not achieve financial success is they have never stopped to define what it is that a “successful” financial picture looks like for them. In order to achieve success in any area of life, you must first define what it looks like. Otherwise, how will you ever know if you actually ever achieve success?
The path to achieving greater success with your money can be viewed in three critical steps: Vision, Goals, and Habits.
The “M” stands for “Money”. Your Vision is what financial success means to you. This is where it all must start, and unfortunately this is the step that most people skip. Most people start by writing down goals, yet fail to tie these goals to a bigger picture of what they want the end result (i.e. financial success) to look like.
Step 1: To create your “M” Vision, answer this one question:
“Imagine it is one year from today, January 2017. Looking back over the past year, what must have happened with your personal finances for you to be happy with your progress?”
As you answer this question, remember you are looking back from the future. Everything you say and write down has already happened! So describe it in this way. For example, don’t say, “I hope I have saved $5,000 in an emergency fund,” or “I want to pay off my credit card.” Rather, “I have $5,000 saved in an emergency fund,” and “I have paid off my Visa.”
Step 2: List your top three to five “M” Goals to accomplish in 2016
With your vision in place, it is now time to narrow down your focus to the specific action items. Examples might include:
- Put $250 per month into savings
- Start a college savings plan for my kids with $200 per month
- Pay off a car loan
- Save up $10,000 for a down payment on a new home
- Establish (and stick to) a monthly spending plan
Out of this list, try to choose the #1 goal that, if accomplished, will make the others easier or no longer necessary. Typically one goal will be a catalyst to better accomplishing the others. For example, paying off a car loan may free up $400 per month to then “super-charge” your savings goals. Or, establishing a spending plan (a.k.a budget) might just be the necessary step to achieving any of the other goals.
Step 3: Establish the two “M” Habits, or actions, necessary for you to accomplish the #1 goal
This is where the rubber meets the road. What two habits, or actions, will you implement consistently to achieve this goal? These must be very specific, and ideally you can put these habits into your calendar. Depending on your specific goal you have chosen to tackle first, here are some examples:
- Spend no more than $100 per week on groceries
- Save 10% of my take-home pay each pay period into a separate savings account
- Contribute 5% of my gross income to my 401k at work
- Pay an additional $200 per month toward my car loan
- Review and discuss our family spending plan for 30 minutes each Sunday evening
The first step to achieving a Bigger, Better Future™ for yourself and your family, is to go from “wishing” or “hoping”, to planning and execution. Commit to your #1 goal and then have the courage to make the changes necessary to improve your financial life in 2016!