7 Smart Money Moves For Financial Success
Step 1: Let the Past Go
The first step is to forgive yourself for your past money mistakes. That sounds a little "woo-woo", but I do think it's an important starting point. Stop beating yourself up for decisions you made in the past, and go forward from here. We've all made bad money decisions at some point in our lives. I've never had a client come to me and say "well, we've done everything right so far, where do we go from here?". Instead, most people come to me with the normal set of successes and failures. They've done plenty of things right, but there are things they regret as well. So please stop beating yourself up for mistakes you may have made in the past. Stop focusing on that negative energy, and focus on a more positive future!
Step 2: Understand Your "Why"
Next, it's also really important that you understand your own "why". Why do you want to get better with money? Why are you doing this? Why are you even reading this blog post? Getting your financial situation in order is hard work. You're going to face tough decisions. You’ll want to be completely clear on your goals and why you're doing this. If not, you are more likely to fail. I really like the work of Simon Sinek and his idea to "Start with Why". Happiness comes from WHAT we do. Fulfillment comes from WHY we do it. Be clear on why you want to improve your financial situation to increase your odds of sticking with it.
Step 3: Set Up a System
The next tip is more tactical. You need to set up a system to automate your finances and take your own will power (or lack thereof) out of the process. You'll want some kind of system to track your expenses and make sure you are following a well-conceived spending plan (also known as a budget). Now everyone's idea of a spending plan will look different. I personally love YNAB (You Need a Budget) to make sure I am allocating my spending in a way that lines up with my values, but YNAB isn't for everyone. There are plenty of other budgeting programs out there like a simple Excel spreadsheet or mint. For others, instead of specifically tracking spending, they set up a system to save and allocate funds for future expenses (vacation, new car, appliance replacement, etc), then know they can spend everything that's leftover. This article gives a good summary of the best budgeting apps and tools available today. The key is to find something that works for you and commit to sticking with it for the long term.
Step 4: One Step at a Time
Next, make sure you are taking small steps. Just like with forming habits and lots of other things in life, if you try to take on too much right up front, you are a lot more likely to fail. I love the book Atomic Habits by James Clear. It's all about the compounding power of making small changes. You can apply this to your personal finances, too. Maybe start by saving a very small amount (that you automate) such as $50 a month to your college savings plans. Maybe set up a separate savings account and transfer $100 a month to be used for that inevitable house or car repair. Maybe commit to tracking your spending for a week. Whatever changes you want to make, the key here is just don't take on too much at first. Some people get so excited about making changes in their lives that they try to do everything at once. Again this is probably a recipe for failure in the long run. It’s much better to start slowly and build on those good personal finance habits.
Step 5: Grow the Gap Between Income and Expenses
The next step is to "grow the gap". By that I mean the key here is to make sure that there is a difference between what you are bringing in as income and what is going out as expenses. You want that amount, the difference between income and expenses, to be growing (in a positive direction!). Now there are really just two ways to do that. One, you can lower your expenses or two, you can increase your income. For most people, the answer is a little bit of each.
Step 6: Build In Periodic Reviews
Next, you need to build in a system of reviewing your finances on a regular basis. Maybe that's every week, maybe that's every month or every quarter. It doesn't really matter as long as it is something that works for you, that you can stick to consistently. Nothing that I'm advocating so far is actually going to do you any good if you can't keep it going and if you aren't monitoring your progress. It’s also really important to celebrate your wins along the way! You’ve got to make this fun and motivating if you are going to stick with it.
Step 7: Stay In Your Own Lane
The final tip I'm going to give today is to "run your own race." That means try not to pay attention to what everyone else around you is doing. Everyone's in a different situation, and the truth is you don't actually know what their financial situation is. There will always be people who are making more, saving more and buying more than you. Trying to "keep up with the Joneses" is a sure way to doom your personal finances. Focus on yourself and your family, and make progress in the ways that you can. Stay focused on your own goals is the truest way to get to personal finance success. Know your “why”, clarify your goals and power forward with confidence and conviction.
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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Alyssa Lum, and all rights are reserved. Read the full Disclaimer.