If you are like me (I would wager most are) then you have dreams of things you would like to do or accomplish in the future that require money. I would imagine that many of those bucket list items require more than just a few dollars saved up to accomplish. I find that often we leave these bucket list items stagnant. They can end up being more like daydreams than realizable goals. I would like to suggest as long as these items are more like daydreams then realizable outcomes they probably will not happen.
Having a vision (clear direction of where you want to go) with your finances will be the first step in creating a means to turn those daydreams into something that could happen. Once you have a vision for your finances than you can begin to establish a financial structure to make it come to pass. Profitable companies always have a strong vision and mission statement. It works for an individual or family as well. Once a company establishes a vision they are able to create a mission and objectives that work towards attaining the vision. The same can be said for an individual with financial vision. While it doesn’t have to be as structured as a company, with a vision in mind the individual can begin to create objectives they want to meet that gives a structure and lens with which they can make financial decisions.
When establishing a vision for your financial success ultimately it should be what makes you happy. Comparison to other individual’s finances is a trap. It can lead you to try to keep up with the Jones’ instead pursuing objectives that fancy what will make you happy.
In terms of practicality – establishing a vision for your finances most likely will mean establishing where you would like to be financially 1 year from now, 5 years from now, 10 years from now, and so on – all the way up into retirement. This can include how much you would like to have saved/invested during this time frame, big purchases that you would like to make, how much debt you want to pay down, where you want to be living, what would you like the size of your family be, etc. The further out you go it probably will not be as precise as where you want to be one year from now and that is okay!
It is normal to change these items as you grow and move along in life. Some of the items on your list can be items that have factors that are outside of your control such as the example I used above of determining what size you would like your family to be at any point in time. Items like this should be listed so that you can determine more controllable objectives such as home purchases, and the standard of living you will want to have reached through a combination of income level, expense control and savings. This makes it possible for you to be where you want to be financially in the event that the less controllable things occur like the desired size of your family.
Now, let’s talk practically how to achieve the vision you have laid out! For each item you have listed as part of your vision, take time write out the practical objectives/goals you will need to accomplish to reach each item you have listed. There will be certain goals that apply to each statement and can just be written as key general goals to obtain financial success. For example – breaking the cycle of living paycheck to paycheck will be key reaching any item that you have written down. Having an emergency fund equaling 3 to 6 month’s salary is another key objective to meet that will be key to reaching other objectives written down. When you are working through building you goals/objectives check out this article that I wrote on goal-setting.
Giving your money vision will change how you view every transaction you make. In a way you are giving purpose to your financial decisions -spending and saving because they are now working towards your vision. It doesn’t mean you have to refrain from spending money or that you never get to have fun anymore it just means that you have become wiser when you do spend and don’t have to deal with near as much buyer’s remorse later. Rather you can give yourself the freedom to spend money within your plan knowing it will not keep you from attaining all that you are planning to accomplish. Finally, it means you are now on a track to reach your version of financial success.