How to Start Managing Your Finances

Begin On Your Couch

 

I know what you’re thinking. Another boring blog about personal finance, right? My goal is to change your mind about that as soon as possible! How do I plan to do that? By venturing beyond the usual fare of budget, saving and investment advice. Don’t get me wrong, that stuff is really, really important and there is room for everyone on the personal finance education market. I think how to start managing your finances begins a little closer to your living room couch, capiche? That’s right, it starts with you.

 

Okay, so what does that mean? Well, it doesn’t mean jumping right in to couponing or cancelling your cable package. It means taking a few minutes to sit down and think about how you got to where you are in the first place. The real truth about being good at managing your money starts with being aware of why you made the choices about money that you’ve made in the past and how to do a better job of making those choices in the future.

 

If you stop and think about it (and I’m strongly suggesting you do that now), any money management program starts with planning. What are my personal finance goals? How much money will I need to send my kids to college? How much money will I need for retirement?

 

Anyone will tell you that you have to know where you are going before you can figure out how to get there. I’m simply suggesting that you adjust your starting point and you do that by asking yourself questions about money decisions you’ve made or are getting ready to make and being honest about the answer.

 

Here is an example of what I mean: ask yourself “why?” “Why do I have to drive a certain type of car?” “Why am I dead set on sending my kid to that Ivy League college when I know it’s going to cost a fortune?” Asking yourself why you made a choice is the first step in figuring out how to make better choices.  

 

I just want to be clear that I am not saying don’t buy the nicer car or don’t send your kid to college. What I’m saying is work to figure out why it’s important to you to make that choice and be honest about it.  When you get down to the real motivation for your choice, you become empowered without realizing it. You then get to make an educated choice that is aligned with your true financial and personal goals.

 

The likelihood that this technique will produce financial security is much higher than an unexamined choice. The reason for this is that making a choice based on your own best self-interest, not the self-interest of others, will result in a choice that you feel confident and happy about, that you know is right for you. That foundation of confidence and belief that you made a good choice will help you build a pattern of choosing carefully in the future. Sounds pretty simple, right?

 

So, in order to help you get to the bottom of your choice-making process, here are some questions you can ask yourself:
1. Why do I want to spend money on this item or why do I want this item I am about to spend money on?

2. Is it in my own best interest, now or in the future?

3. Will spending this money make me feel better or worse about my financial situation?

4. Are my basic needs met or will I be using money that should be spent on basic needs to buy this item?

 

Once you get used to this technique, budgeting, saving and investing will naturally follow. In the meantime, don’t waste energy beating yourself up about past choices. Tomorrow is a new day and a new opportunity to try again. Keep working on it and sooner or later, you’ll get the hang of it!

 

Sincerely,

Joy Alford-Brand

Your Dollar Lama