A large part of success is in knowing yourself. This is true whether you are starting a relationship or whether you are working towards a financially stress free life. If you want to create success in personal finance, then you want to cultivate the behaviors that will lead to financial freedom. Here are some things to consider about yourself to help you achieve your financial goals:
What are Your Strengths?
One of the best things you can do is to acknowledge your strengths. Figure out what you are good at and see if you can turn those into extra income. Consider your strengths as they relate to money. Do you have skills that others are willing to pay for? Can you create something with your hands that others are willing to buy? Are you good with research? Do you have good self-discipline? Recognize your strong points and find ways to apply them to your financial life. You’ll be able to accomplish more and do it faster if you can create a financial plan that plays to your strengths.
What are Your Weaknesses?
It’s fun to acknowledge your strengths. It’s an exercise in feeling good about yourself and recognizing what you do well. Your weaknesses, on the other hand, are not as fun to acknowledge. It still needs to be done though. Take a look at where you could use some work. Are you lax when it comes to tracking your spending? Do you have a hard time saving up for your goals? Instead of developing your talents or your mind, do you spend too much time in wasteful pursuits like video games and TV? Take a look at some of your weak points. Create an action plan to change the way you do things so that your weaknesses gradually become strengths.
What Do You Want to Accomplish?
Now that you have an idea of your strengths and weaknesses, it’s time to determine what you want to accomplish. It really does help to have a plan for your money. Before you make your plan, though, it’s important to carefully consider your values and your goals. You can use this as inspiration as you work toward financial freedom. Knowing what you want to accomplish, especially if it’s important to you, will help you stay focused. It’ll also be easier to set up a more specific savings plan with milestones along the way to get you to the finish line.
What are Your Triggers?
Many of us have triggers that can lead to undesirable financial behaviors. If you know that you spend money when you are upset, it might be a good idea to stay away from the mall or online shopping sites when you are feeling blue. If you feel flush on payday and excited enough to go spend the money, perhaps you sign up for a direct deposit program that puts more of your money in a retirement account or some other savings account. That way you will have less immediate income at your disposal. Think about what triggers your poor money decisions and look for ways to circumvent them.
Bottom Line
Understanding yourself and the way you interact with money is an important part of financial success. Once you know the underlying reasons for your actions, you will be more likely to fix your money problems and adopt practices that are better for your pocketbook.
Do you know and apply yourself so you can make more and spend less? Otherwise, how do you plan to get ahead?
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You need to know yourself and your partner if you have one. I knew my spouse was frugal and that I was also way into deferred gratification. We both grew up in families where nobody bought a car they could not pay cash for and nobody ever ran a credit card balance. I knew we did not need a budget and that we’d save aggressively by controlling our wants. But we couldn’t have been so unstructured had we not known overspending was not a risk we faced in the least.
Thanks for the article Miranda. Honesty with yourself is a key first step to financial independence.
I disagree however that your perception of strengths and weaknesses tells the whole story. People need to become more comfortable with tracking their actions. Perception can be deeply flawed. Tracking will bring real data into the situation from which you can make educated decisions to alter your habits.
Here are some tips:
– Download your credit card statement and analyze it
– Track your spending for a week (every dime)
– Set specific measurable goals for a month, then see how you did
I agree to start with ourselves. Maybe, we spend too much on unnecessary things and complaining about our income is not enough. It is better to choose a certain lifestyle in which our income stream will work on it. Prefer a higher lifestyle? Therefore, find other ways to earn money. Let us be creative in accumulating wealth.
It is definitely important to assess one’s strengths and weaknesses constantly. Sometimes, we lose one weakness and pick up another unknowingly. I also agree about managing our financial triggers better. For me, I have seen that whenever I am experiencing some sort of deficiency, like in a relationship for example, I tend to go out and buy something that was the not the most financially wise purchase and regret it later.
Our triggers can be avoided by having self-control. However, achieving self-control is not easy as it seems. It requires a lot of practice, patience and diligence to attain it. And we should practice it everyday. That will give us the great habits we can use to achieve our financial freedom.
Good article.
I went for years without having a spending plan in place. We were fortunate that we earned good money, but I never felt comfortable spending money. I never knew whether we could afford it. Never looked at priorities.
Once I created a plan and started looking at monthly expenses in relation to the plan, it was amazing how liberating it felt. I now had a point of reference for spending. If I decided to spend more than the plan, at least I was making the decision consciously.
It’s all about taking control and holding yourself accountable. Once you start down the path of accountability, you will never want to go back.
Thanks.
The freedom part is an under-appreciated fact about tracking expenses.
Thanks for bringing it up, because knowing what you are spending and thus how far you are along the path of financial independence is definitely one of the most empowering moves you can make.
Hi Miranda,
Excellent insight. In addition to what you have said, one of the key areas investors need to be honest with themselves about is the level of risk they are prepared to take with their investments, as well as the capacity to take risk. The first is emotional – can I sleep at night given my exposure to stocks etc? The second is the actual financial ability to weather short term volatility in the market – do you need money in the short term or can you hold on for the longer term?
Asking these questions and being honest with yourself can help you assess your overall tolerance for risk and guide you to make smarter investment decisions that are in line with your goals and preferences.
Kind regards,
Kevin