Sometimes when people think of the word budget, they think deprivation. What they don’t realize is that budgets are merely a guide to help you to live the life that you want. They’re a way to help prevent you from being trapped in a job that you hate because you have to pay the bills for things that really don’t matter. They’re about being in control of your life. The key is to figure out what you want and then create a plan for the future that you desire.
Here are 3 tips to help you to financially plan for the future of your dreams.
Create a vision
Understanding your vision is critical because it provides the basis for the direction of your financial plan. For example, when I was working in Corporate America, I knew that I wanted to transition to full-time entrepreneurship. This vision gave me the discipline to reduce extra spending, save more, pay off debt, and make business investments while I still had a regular paycheck. This also allowed me to ask the critical questions of whether a purchase would advance my dream of entrepreneurship or not. If it didn’t, then I would have to pass. Therefore, ask yourself these questions to create your vision:
- If money or time were not an issue, what would I do?
- What type of life do I want to live?
- What experiences do I want to have?
These questions will help you to brainstorm your ideal life and the feelings associated with that life.
Set goals that support your vision
Once you have your vision, then the next step is to create financial goals that will allow you to accomplish your vision. You must set short-term and long-term goals. The best way to do this is to create SMART Goals. SMART stands for specific, measurable, actionable, realistic, and time-bound. For example, if you know that you need to pay off $10,000 in credit card debt and you want to be credit card debt-free in 5 years, then you know that you need to pay at least $167/month. Once you understand that monthly number, then you can make the associated lifestyle changes and spending decisions to either free up $167/month or earn an additional $167/month.
Manage your money in a way that supports your goals
Create a budget where you incorporate your current expenses, spending, and financial goals. When you do this exercise, you may realize that your expenses and spending are too high and you cannot make progress to your goals with your current spending. In this case, you need to make some changes. One example that I love is one of the commercials for the show, Tiny House Hunters. There is a couple who dreamed of traveling the world and creating new experiences daily. Once they had their vision, they realized that paying a large mortgage would not allow them to live the life that they wanted. Therefore, they sold their home and then bought a tiny house that they could attach to a trailer while they traveled around the country. I know that sounds extreme, but I share this to say that understanding your vision will drive the associated actions and sacrifices that you need to make in your life and finances.
Once you have your budget and know what you need to do to accomplish your goals, then you need to track and monitor your spending to ensure that you are making progress towards building the finances in a way that allows you to live the life of your dreams.
Now that you know what to do, leave a comment to let me know how you plan to take action.