I know the word budget scares a lot of people, because the very idea of budgeting implies restrictions on their hard-earned money. If you have that mentality, you better change it as soon as possible, because I can assure you that you will not get far as you have already started with a negative attitude. Think of this whole scenario like a financial plan where you are at point A, and want to get to point B at the shortest time while avoiding all the obstacles along the way. As I said last time, it won’t be easy and sometime you will be forced to make difficult decision, but set your eyes on the price, that is, financial freedom. Paul J Meyer explains the three steps that can assist someone in coming up with a financial plan.
All of us have an unlimited number of alternatives to which we can allocate our finances. We have things we would like to do, ministries to which we would like to give, and items we would like to buy, all of which cost money. The problem that the vast majority of us share is that we have a limited amount of financial resources to meet our financial desires. This creates the necessity of using our resources as efficiently as possible. For that, we need a plan.
Step #1: Set Goals
The first step in developing any plan is to set goals. Determine what it is that you want to accomplish. This defines the reason for the very existence of the plan itself. Financial goals should be reasonable, and, very importantly, they should be measurable. If goals are not stated in measurable terms, then they are vague, and it will be difficult to know when they have been accomplished.
The power of goal setting is awesome! When we take the extra time to write our goals down, and let these written goals serve as a constant visual reminder of where our efforts need to be focused, the power of goal setting becomes even greater.
Step #2: Determine Your Current Position
This step answers the question, “What do you have to work with that is going to help you achieve your objectives?” For most people, the two primary resources available to them are their current income and their current assets. Their discretionary income (income after obligatory payments such as taxes, mortgage, and other debt payments are made) should be directed into those areas that will help them attain their goals most efficiently.
The same is true for one’s assets. When your assets are not lined up with your goals, this results in inefficient money – money that does not work hard for you; its potential is not being fully utilized. We must get all of our current assets to work their hardest for us, as well as direct a portion of our income stream into investments that will help us achieve our goals most efficiently.
Step #3: Develop a Step-by-Step Written Plan
The next step is to develop a step-by-step written plan to get you from where you are to where you want to go. This written plan should outline the action steps necessary to achieve the desired goal, as well as specify a timeframe within which each step should be taken. Milestones should be built into the plan so that your progress can be measured on a regular, periodic basis.
These are the same steps you would follow in planning a two-week vacation. You would take out a map, circle your destination, circle your starting point, and then map out the shortest route from the starting point to the destination. The sad truth is that most people will take more time to plan a two-week vacation than they will to plan their entire life’s financial affairs.
Begin planning for your financial future today – take the first three steps!