Charting a Financial Road Map
- Friday, December 19, 2003
GAINESVILLE, Ga. (BP) — It may seem strange, but many people don't know if they have financial goals. Even stranger, some think they have financial goals when they really don't. "Get rich" or "make as much as possible" don't qualify as goals, because true goals have to be measurable at different points in time in order to be of any real use.
The Long and Short of It
Financial goals need both a short- and long-term look. The key to successful goal-setting is to identify realistic goals and then keep your goals simple and measurable.
For example, instead of the "get rich" goal mentioned above, determine that you want to set aside a certain percentage of your income within six months as an emergency fund. Or, establish a longer-term emergency fund goal of three to six months' income in an accessible savings account within a two-year period.
Determine how much you can set aside each month, then start paying yourself first.
Keep It Simple
Don't set goals with complicated details to be achieved in the distant future. Plans like that could discourage you from continuing. Start with a simple plan, reachable goals, and then go for it.
Most people have traveled from one place to another and used a road map at some time. Road maps are so useful because you can establish where you are, see where you want to go and then determine how you're going to get there.
If the term "budget" doesn't appeal to you, how about calling your plan a "financial road map"? You need to know where you are financially in order to set a realistic financial destination or goal; otherwise, you won't know how to get there.
Imagine that you want to arrive at a financial destination of $25,000 in savings. You won't know what route will take you there unless you know where you are financially.
You can't simply say, "All I have to do is save $1,000 a month for the next two years and one month and I'll have $25,000." Your math may be accurate, but you only make $3,000 monthly, and your mortgage and car loan payments total $1,200 monthly. Oops! You need a budget — OK, a financial road map.
Been on This Road Before?
Where does your money go? Use a financial road map to help you identify areas where adjustments need to be made to create extra cash to meet your goals. Keep track of spending for 30 days. Identify where all expenses are going, including the cash you give yourself every pay period. Where do you spend it? Does your income match your expenses?
Develop a plan that will be your road map for monthly spending.
Avoid paying the minimum amounts on your charge cards. Add $25 to $50 per month to each payment. You'll get yourself out of debt quicker and save money on interest charges. One of the best investments for the average person is to pay off his or her credit card debt and then stay out of debt.
Too Much Month at Money's End
That "too much month at the end of the money" cliche is no fun. You may be among those who spend more than 40 percent of their annual food budget in restaurants. Brownbag lunches for a month to see how much you'll save — then bank what you didn't spend.
Money is a tool that you can use to reach short-term and long-term goals. "Do not weary yourself to gain wealth, cease from your consideration of it. When you set your eyes on it, it is gone. For wealth certainly makes itself wings like an eagle that flies toward the heavens" (Proverbs 23:4-5).
Short-term goals are current lifestyle goals such as debt reduction, savings and giving. Long-term goals will be accomplished over a number of years such as funding education costs, saving for retirement and giving an inheritance.
Learn to handle the smallest thing God has put under your authority — your money. Luke 16:11 says, "Therefore if you have not been faithful in the use of unrighteous wealth, who will entrust the true riches to you?"
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