When it’s time to get serious about our finances, and put together a goal of reaching financial freedom, many of us want to start with the plan or the budget. We begin figuring out income and expenses, and creating a strategy for paying down debt, or figuring out how much needs to be invested in order to reach retirement goals.
While these are important aspects of financial planning, and getting on top of your money situation, the reality is that putting together a plan isn’t your first step. Your first step should be figuring out what matters to you.
Mindless Spending = Financial Waste
We hear a lot about money leaks and how to plug them. However, the reality is that you may view something as a money leak while someone else might not. It’s all about what matters to you.
I used to buy things because I thought they might be okay, or because someone else had it and I thought it was cool. Many of us make purchases without thinking about it, because they are placed in our eye line, or to keep up with the neighbors.
How many times do we see what our friends and family have, and determine that we should have it too?
When you don’t know what matters to you, it’s difficult to say NO to spending that’s unimportant. How do you even know if it’s important (or not) if you haven’t identified your own values? Mindless spending leads to financial waste.
One day you’ll look around your house (like I did) and wonder why it’s full of stuff you don’t really care about, and rarely use. Then you’ll regret not using that money to invest for the future, or at least to buy an experience that you could have really enjoyed.
When you get clear on what matters to you before making a financial plan, you’re less likely to spend mindlessly. When you know what matters to you, it’s easier to make the spending decisions that bring you closer to your goals, and allow you to live the lifestyle you want.
Create a Plan that Matches Your Values
Once you know what matters to you, you can put together a more successful financial plan. Figure out what you want your money to accomplish for you. Do you want to give to charity? Travel during retirement? Reach debt freedom? Help your kids with college? Have the ability to take a vacation each year?
Prioritize your goals according to what matters most to you, and the time-frame you have to accomplish them. You might have 30 years until retirement, but you may only have five years to meet your goal of a sizable down payment on a home. Take that into account, then create a financial plan around what matters most.
Once you’ve completed that step, it will be easier to say NO to the things that don’t matter very much to you. Then you’ll have more money for what’s truly important in your life.
What are your spending priorities? Is your spending lining up to what matters most to you?