Principle #1: You Won't Get Anywhere If You Don't Know Where You're Going
Ever get lost while driving? Remember how it feels like going round and round in circles? What about the time you were on vacation abroad and you spent the whole morning not knowing where to go or what to do? Frustrating, right?
It's a lot like that when we don't have plans. And all plans start with goals. If you tried (operative word is "tried") to go on a diet without setting specific weight or waistline goals, most likely you would have lost ten pounds in a week and gained everything back (and then some) the next. Trust me, I should know.
It's the same with our personal finances. Oftentimes, it feels like we're not getting anywhere. That's because we don't know where we're going in the first place.
My mistake in the past was not setting goals for my financial life. So I started making investments in stocks and mutual funds without any specific goal than to save and invest. Then came sudden events that require a lump of cash that I didn't have (the market was down that time). If I had set clear goals and planned well, I would have avoided those stressful moments when I had to scrounge for funds.
So the first step in financial planning is determining where we want to go. In other words: goal setting.
Set goals. Goals give us direction. They're also an excellent way of getting us motivated and disciplined. So the next time you pass off that Frapuccino to save up for something, you won't feel too bad.
Write them down. There's power in writing down your goals. It's one thing to day dream about what you want, it's another to cast it, well, on paper (or in Excel if you like).
Tell people. There's even greater power in telling loved ones about your goals. It takes stronger commitment when others know about what you want to achieve. And it somehow makes you more accountable for your words.
Now, how do you go about this exactly? Take a piece of paper and follow this exercise. Better yet, open Excel or Word.
Ready? Here you go: I want you to day dream. Go ahead. Close your eyes and think about your dream life. Imagine your ideal life in the future. What do you see? Be very specific. What kind of house do you have? What kind of cars? How many kids do you have? What is your spouse doing? What are you wearing? What do you see inside the house? Dream all you want. It's free.
Sorry to interrupt your reverie. It's time to list down your goals. How do you start? Well, most of us have goals that fall under five categories. Ask yourself:
1. What do I want to be? This is about how you see yourself as a person: a father, spouse, son, citizen, etc. It's about your values and how you would want to live your life based on them. What kind of person do you want to be?
2. What do I want to do? This is about your career or vocation. What kind of job do you want? Or what kind of business or work do you want to pursue?
3. What do I want to have? This refers to the material things you want to acquire -- house, cars, gadgets, clothes, La-Z Boy chair.
4. Where do I want to go? This is all about your dream destinations. Where do you want to travel?
5. What do you want to give? This is about giving back -- to your church, a charity, people around you, and uhm, me (pushing my luck).
Right now, just jot them down and have fun doing so. If you have a significant other, do this exercise with him or her. It's always nice to dream. Next week, we'll continue this exercise on goal setting. But it will be more detailed and organized.
