In a famous letter to the US government in 1854, Chief Seattle wrote “The end of living – The beginning of survival.” It was in the context of caring for the Earth, and his words are as true today as they were then.
I remember reading that for the first time and I thought immediately about transitioning from childhood, to a young adult, and onto being a grownup. How when we’re kids, all we’re thinking about is having fun and living. When many of us enter college, we take on student loans.
Upon graduation, we rent apartments, buy cars and start paying back those loans. We look for, and accept jobs to finance our new lifestyles. It’s at this time when we make the shift from living to survival.
While this scenario may not be true for all of us, that two thirds of Americans are living paycheck-to-paycheck, and it’s been estimated that almost 80% of us dislike our jobs. If that’s not surviving versus living, I don’t know what is.
Here’s the bottom line; people feel stuck in work they don’t like because they need money.
This leaves people feeling stressed, anxious, overwhelmed and unhappy.
What’s the way forward?
In order to break free of this negative cycle, we must gain control of our finances and get out of debt.
All too often, when we’ve got a problem we don’t want to face, but make like ostriches and put our heads in the sand. But that’s not a winning plan. In order to get moving in the right direction, we need to face these problems head-on.
Here’s what we’ll cover:
- Gold, silver and bronze medals of personal finance
- Security first, then financial prosperity
- Know yourself
- Know your facts
Let’s get started.
Gold, silver and bronze medals of personal finance
There are a lot of moving parts when it comes to personal finance, and many of those parts demand our attention. In the spirit of avoiding overwhelm, here are the top three to focus on.
The Gold medal: Pay yourself first. If you’re in the habit of paying everyone else first, and waiting until the end of the month to pay yourself, you’ll find there’s no money left over for you. You pay yourself by enrolling in your company’s 401(k) or setting up an IRA. This will help ensure you won’t have more month than money.
The silver medal: Stay out of debt. Avoiding debt is best, but if you find yourself in credit card debt, aggressively work to get out. I’ll share my timeline in a bit, but getting out, and staying out of debt, must be a top priority.
The bronze medal: Diversify. Learning that market prices are generally right, and that it’s really hard to beat the market makes you a wise person. This is not to say you should never invest in individual investments, but I am saying the majority of your portfolio should be broadly diversified. This can be accomplished by using vehicles like mutual funds or ETFs.
There are many more lessons to be learned, but if you focused on these three, you’d be on the right track.
Security first, then financial prosperity
Truly, I want everyone to enjoy financial prosperity.
And I know that will not be found until you first find financial security. That should be the first goal. The rest of this post will focus on helping you achieve it.
While I’m happy to discuss the ordering of steps, and or specific amounts, security first- then financial prosperity is a first principle.
What’s your earliest money memory? As it turns out, our experiences from birth to age five have a profound impact on the rest of our lives. This is also true of money. Spend time thinking about your early experiences with money, they inform your current behaviors.
We all have an internal operating system. It’s constantly running in the background, helping us make decisions and judgements. Our systems were created our DNA, and our early childhood experiences. Unfortunately for many of us, we have negative or limiting beliefs about money which keep us from enjoying the success we ultimately want. Pay attention when you’re triggered by something and that will help you understand your core beliefs.
The good news about our beliefs and operating system is they can be changed. When you start noticing them, you can start rewriting them.
The next step is to figure out where you want to be and how you want your financial life to look. Spending time thinking about your goals will help you get clarity on your priorities, which will help you create beneficial habits.
Know your facts
To take ownership of your finances, you need to know your cash flow, budget, debt and assets. Seem obvious? It is.
But as you know, the things that sound easy are oftentimes the most difficult to do.
Do you know how much money is coming in and going out every month?
Do you know how much debt you have? Do you know your net worth?
Knowing these numbers, along with keeping a personal or family budget, are foundational to your success.
I love having a step-by-step process to follow. These steps can lead you to financial security:
- Get $1,000 saved in an account separate from your everyday checking account. This is your initial emergency fund.
- Pay yourself first. Enroll in your 401(k) or open an IRA.
- Get one month’s expenses saved in your emergency fund.
- Attack your credit card debt. You can access our Get Out of Debt course at no-cost.
- Get two month’s expenses saved. Then three, then four, then five, then six.
I’m aware this won’t be easy and can take a long time. But doing so will bring you financial security. Having financial security will position you for financial prosperity.
The more we can automate our personal finances, the better. Doing so reduces our ability to mess things up.
Set up automatic bill pay, automatic contributions, and set recurring monthly meetings to review your finances. You can also utilize automatic rebalancing on your investment accounts. This post will help you automate your finances.
Don’t let perfect be the enemy of good. As you’re getting started, don’t wait for the perfect time. You’ve just gotta get started and get on the path.
Once you’re on the path, don’t let slip-ups derail your success. Just keep on moving.
You’ve heard the saying “A stitch in time saves nine,” and that teaches us to address new issues as they pop up. Take on new challenges immediately; don’t put them off.
Getting back to living should be a top priority. Being stuck in survival mode is not a happy place to be. Following these steps can help you find financial security which will lead to peace of mind.
Peace of mind will allow you to address other aspects of your life, and will you closer to living how you want.
If you’re ready to take full ownership of your financial life, check out our DIY Financial Plan
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