Where’s Your Focus?
Posted by Ken | Filed under Ken
Here’s a look back at my financial journey. I’m come so far since then…
After completing my own Financial Snapshot, it was obvious that my financial life lacked any kind of focus. My day-to-day spending was riddled with inefficiencies – unrestrained entertainment spending, unnecessary ATM fees, sizeable (un-trackable) cash purchases, the list goes on.
All this, in addition the “good” stuff in my “budget:” aggressive student loan payments and retirement savings…both of which I had allocated a random random amount that I figured would be appropriate.
These two sides of the equation together were putting me farther and farther behind every month. And before I completed my Financial Analysis, I had no idea why.
Focusing my budget into an efficient tool required that I establish my priorities.
If you’re working with a limited cashflow, you need to balance your priorities with your resources (cash). If you have more resources then you have more options. If you’re working with limited resources, like I was, then prioritizing your goals becomes even more critical. You need to ask yourself what you can do without, in order to get ahead. I want to emphasize here that this isn’t about sacrifice – it’s about discerning value. It’s about constantly asking yourself if a purchase enhances or inhibits your ability to reach your financial goals.
“Do I buy my lunch every day at work, which enriches nothing, or do I brown-bag it so that I can enjoy dinner out with my friends and enrich my social life? I can’t do both because it will prevent me from paying off my credit card faster.”
See what I mean?
After completing my own Financial Analysis, I prioritized my financial goals. Above all else I wanted to clear the remainder of my student debt. I wanted to travel. I wanted to save for my first home while also saving for retirement.
By monitoring my spending and focusing my budget, I was actually able to be even MORE aggressive with my student loan payments, clearing them within five months. Finally I was free to allocate my resources to other priorities that were important to me – a travel budget, a home savings plan, retirement savings, and now self-directed investing.
All it took was a little bit of focus …and a healthy dose of determination.
How did I stay focused?
As a twenty-something, (hopefully) there’s a moment you realize that you actually don’t have all the time in the world. Realizing at the age of 27 that I had begun my adult life behind the starting line had a way of panicking me into action and forced me to attend to my finances. The desire to enrich my life with relationships and experiences versus material possessions also helped to keep my cashflow in check and only spend money on what truly mattered to me.
Establishing a routine helped make the process a lot more effortless. By forcing myself to confront my finances on a weekly (and often daily) basis, I alleviated a lot of the stress I previously endured when the dreaded credit card bills came once a month. By establishing a routine, I made the process a lot more effortless. The magical thing about finances is that you can quantify the success of your behavior. Live frugally and you’re properly rewarded by watching your net worth rise. Fall off the wagon and you put off completing your goals for another month. The numbers don’t lie.
The reward for my focus and energy is the control I have gained over my life.
To you, my wonderful readers, I ask:
- What keeps you focused on your financial priorities?
- What are the biggest distractions that derail your focus?
Until next week,