A Step-By-Step Guide to Money Management
If you have the desire to achieve your goal when it comes to managing your money, then you need to understand what I call my big question: Why is it that you care about managing your money to begin with?
Many people just mosey through their lives without any real knowledge of where their money goes after their bills have been paid. So, why is it that you want to be the one who takes the next step when it comes to managing your budget to achieve financial success? Why are you so motivated to be more responsible when it comes to your finances?
[Read: Ways to Solve Your Debt Problems]
The Reason to Manage Your Money
I have spent many years giving speeches and writing about how to obtain financial success. I have also talked to hundreds of people about their finances and I have taken note of some very consistent similarities. I have found that people are more motivated to achieve financial success by the type of lives they will lead and the opportunities they will encounter than they are worried about the amount of money they have in their bank accounts. What I’m saying is that people don’t want to achieve financial success just to have the money. They desire financial success because they really want to leave their monotonous nine-to-five, Monday thru Friday lifestyles behind.
How to Get Started
If you want to manage your money the right way, first you should think about what that means to you. Try to think of some goals that you want to achieve. For right now, just let the thoughts flow and don’t hold yourself back, because you will do that later. Write down everything that you can think of, no matter how ridiculous it may seem. Some examples include: donating to a charity, buying those expensive shoes you love, purchasing a new vehicle, or taking that nice family vacation.
Short, Medium, and Long Term Goals
Once you’ve finished writing down all of your goals down on a sheet of paper, separate them into three separate categories:
- Short Term Goals are goals that can be achieved in a year or less such as purchasing an expensive gift or going on an extravagant night out.
- Medium Term Goals are goals that can be achieved within the next five years such as taking a vacation to another country or purchasing a new vehicle.
- Long Term Goals are goals that will take more than five years to accomplish such as retiring or making your final mortgage payment.
Calculating the Cost
Now that you’ve written down all of your goals, write down how much each of them will cost. Taking that trip to another country may cost $3,000. Purchasing a new vehicle may cost $20,000. You need to go through every goal you’ve written down and put a dollar amount next to it.
Separate this dollar amount by the number amount of months that are between now and when you believe you will achieve that goal. You may not know when you will purchase a new vehicle, but if you think it’ll be within the next five years then write four years for your estimation (which is exactly 48 months from today). Now, for example, it will cost you about $20,000 to purchase a new vehicle, so you would divide that by 48. The answer is 416.70, so if you want to save up to buy a new car, you will need to save $416.70 dollars a month for the next four years.
Cutting Out Some of Your Goals
Now that you’ve arrived at this step, you’ve most likely realized that the amount of money you’d need to save each month is a very large sum. If we’re being completely honest, the amount of money you’d need to save is probably significantly higher than the amount that you save now. In fact, it could be more than you actually earn. In order to achieve financial success, you need to cut out those goals that you consider to be less important than the others.
If you’re putting this much thought into your goals then you’ll discover that some of them aren’t as important as others (like those new pair of shoes) while some are at the top of your list of priorities (like saving for your son to go to college).
My step-by-step guide will help you understand the big question that drives you to attain your goals and achieve financial success. If you wish to investigate this topic further, then I suggest this article. The most important piece of information you’ll need is how much money to save each month in order to achieve financial success.
For even more information about this subject, check out this YouTube video: