As we round off Financial Literacy Month, I'd like to talk a little bit about the perfect money mindset.
As many of your know, I started my financial independence story in 2009 with $255,000 of debt. As I look back and think about the key things that propelled me to where I am today, three things come to mind.
Without these three fundamental changes I am positive I would not be financially independent today.
I faced reality and took responsibility for my life, not to blame and criticize myself, but to understand the situation, on paper.
Once its on paper, its right in front of you, there is no denying it. We all make mistakes, I am no different. Its from those mistakes and hardships that I got my biggest lessons.
I changed my vocabulary from I “can't” to “will”, and finally came to the realization that I already have every tool I need to make a great life. I trust and listen to my gut.
Translated My Why into Goals
There is a difference between being pushed to do something versus being pulled.
Pushing means you know you should be doing something but don't really have any motivation.
Pulling yourself forward means there is something greater than yourself that needs you to be better.
This basic mindset shift is critical and the very reason so many people lose motivation. Take exercise for example. Everyone knows exercise is important to a maintain weight and a strong body. So why do we have record obesity in this country?
My push statement was that I knew I would be better off … in the future, if I would save money after paying my bills.
My pull statement is I no longer want to live paycheck to paycheck. I deserve better. My kids deserve better.
Working backwards from my pull statement I started to pull together my goals, from annual to quarterly to monthly to weekly to daily. Each time breaking the goal down to bite sized pieces.
Working backwards showed me a direct line from my actions today to how it will impact me in the overall picture of the life I was working towards.
Before I even started a budget, I had to understand where my money was really going.
Sure, like most, I had an idea and kept a tally in my head, which basically means I had no idea where my money was going. When I started recording my spending, there was no denying that my mind was feeding me a load of bull. What I thought I was spending in a month of food, restaurants and discretionary was very different from reality. This is a common mistake many make.
Once I had a couple of months recorded, I could see a pattern and focused on one category at a time to cut spending.
I want to be clear on one thing. Maintaining a budget was by far the most freeing thing I did for myself and family.
Once I was able to get my spending under control, it gave me a new found freedom to spend in other areas that aligned more with my life.
Budgeting has a bad reputation of being restrictive, but that could not be further from the truth. Don't believe me? Try this.
First, make a list of priorities in your life.
Second, record your spending for 2 months. Don't make any changes, just live your life and record spending.
Third, does your spending align with your priorities?
These are the conversations I would have with myself every month. Did that spend add value to my and my family's life? What can I do better for next month to make our lives a little easier?
I truly believe we can do anything we want to, if we plan for it.
Want to take a cruise next summer? Research the cost, incidentals, travel to/from, etc… then add a line item in your budget to save up that money.
Want to be free of debt? Record the amount paid towards debt and the amount of interest and penalties paid every month in two separate lines. This was a sobering activity. To see how much money is given away, yes, given away to credit cards companies, just for the pleasure of rolling the debt over month over month.
Its amazing how life changes when we take the time to think about what is truly important. Keeping up with the Joneses certainly is one of the first things that gets cut from the list. 🙂 (Or at least it was for me. 🙂 ) Once I cut through the noise and focused on what really made me happy, I realized, I had a lot of that in my life already.
My kids are healthy and happy. I have a great relationship with them (for the most part – they are teenagers after all). I am blessed with great friends and family.
I get to serve my community in this small way, helping people get their financial life in order. I love helping people. I love knowing that something I did made someone else's life a little easier. I get to meet really interesting people, like you, on this journey.
So after 10 years of being on this journey, what I finally realized is that financial independence is an amazing feeling it also came with an abundance of self confidence and esteem.
Sure I still make mistakes, no one is perfect. But everyday I do my best. In the end that is all any of us can do.