What Keeps You On Track Financially?
|February 17, 2011||Posted by Roshawn Watson under Uncategorized|
By: Roshawn Watson
As we gain ground financially, there will undoubtedly be temptations to give up or at least deviate from our chosen paths. Regardless of whether your goal is independence, comfort, or significant wealth, life happens. What keeps you on track financially when something disrupts your plan?
The unexpected car accident…the newly identified roof leak…the surprise orthodontics bill. There are many ways to derail a budget. On a daily basis, we are constantly assaulted with opportunities to ruin our finances and ultimately destroy our good habits. Nonetheless, whereas some people are able to resist financial distractions and stay (or quickly get back) on course, others become overwhelmed. If you have ever aggressively paid off debt (i.e. becoming debt-free) or quickly saved up a significant sum, the focused intensity and exhilarating momentum involved in achieving such a goal alone can be enough to keep you on track.
However, after you have achieved such “quick” successes, maintaining your discipline can become the biggest challenge in long-term wealth building. In other words, once you take the temporal blinders off, it’s easy to get distracted by “shiny toys” and “doodads.” In fact, part of the motivation for paying off debt, for some people, is so they can feel comfortable “living a little.” How does one know whether it’s too much though?
Short-Term versus Long-Term Goals
Your time horizon in receiving the benefits of your labor matters with respect to maintaining discipline. For example, if someone told you that you would NEVER get to experience any rewards, but you should still donate your money because it is the “right thing,” would you participate? I would argue many people wouldn’t. Let explain, even if the only reward that you get is gratitude, knowing that you made a difference or spiritual enrichment, that’s more than enough motivation more millions of people to participate. Many charitable organizations realize this simple fact, which is why they constantly trying to communicate with their donors regarding the benefits and implications of their giving. However, if there is no clear benefit, it’s hard to make the case to contribute for many. Of course, not everyone is like this though. Some people are sadistic, glorifying and cherishing self-deprivation. If that’s how someone is wired, it’s fine. However, it is important to realize that such people are in the minority.
Delayed gratification and no gratification are very different for most people. This is one of the reasons why I always discuss paying off consumer debt QUICKLY. As painful as it is, financial counselors say people tend to have more success when they temporarily delay fun while paying off debt rather than trying to do it all at once. Many people can put up with a lot of unpleasantness for a short period. Note, wanting to realize some fun, even if it’s in the future, is not being childish. It’s childish to ignore the need of having some fun, just as it is childish to want to play all the time. The problem arises in reconciling your need for fun with your financial situation. Balance is key.
It can’t ALWAYS be about living for tomorrow!
What Keeps Many People On Track
One of the most powerful tools to keep your family on track is to have a plan. Short-term and long-term budgeting for investments, education, paying off the home, giving, maintenance and repairs, and even fun can spare you a lot of grief. Remember the old saying: failing to plan is planning to fail. There’s so much truth in that statement. Budgeting is perhaps one of the most underutilized methods of hitting your financial goals. It’s just as amazing to see your future on paper, as it is motivating.
Along that vein, visualizing your future is one of the best ways to birth longevity to your plan. In your “mind’s eye,” if all you can see is scrimping and saving, then I doubt you will feel motivated to continue for too long, regardless of how you rationalize the virtue of your efforts. However, if you see a life with no lack, an ability to give like never before, and enough resources to accomplish your life’s work, then that leased BWM seems a lot let appealing and you consequently stay on track.
Another way people stay on track is to know their weaknesses AND develop strategies to overcome them. Study yourself as your greatest enemy thus becoming your greatest friend. If you can’t go to the shopping mall or electronics store without spending way more than you have for such purchases, why torture yourself? One way to apply this is through the miracle of automation. Eventually, we tend to be the humans that we are, and as such, it’s somewhat easy and predictable to lack financial-discipline if we don’t set up systems to keep us on track. If you are one who cannot stick to a plan on your own, make it easier for yourself. For example, consider automating your investments and savings. Also, add some accountability to your life: interact with like-minded people, and use your network as a support system. This could mean joining a forum, creating a mastermind group, or creating your own support network. Discipline is unnatural anyway. We’re creatures of habit…not discipline! One way that I honor this principle is by not allowing certain foods in my house. That way, I’m not nearly as tempted to eat badly, as I would normally be.
Check your allocation. Does your budget pass the reasonableness test? It’s not normal for a family of four to only spend $200 a month on groceries and never do any traveling, so why budget as such, especially if you have some flexibility. This isn’t about making a budget for the perfect month. That’s ineffective at best and demoralizing at worst. Budgeting is about identifying the resources your family has available and properly allocating them towards corporate goals you deem valuable.
These are some of the best ways to I think one can stay on track, but how do you make sure that you hit your financial goals?
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Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.