We now have access to a wide variety of financial information and are able to determine how much money we should spend and define our financial priorities. But, then something happens and we have to make another decision which can sometimes make us feel defeated.   The truth is, whether we like it or not, life is not like the Bill Murray movie “Groundhog Day” in which every day is predictable and runs like clockwork.  We do not live in a bubble – thank goodness – and even though some days seem like others (especially when it comes to work), life is hardly ever the same every week let alone every month or year.  You may work at the same place for a long period of time or, if you are fortunate, stay married to the same person your entire life but many things change and we need to learn to be able to handle those changes and not feel defeated if they do not fit into our plans.

Ground-Hog-Day © by Henrykim.kr

The same thing is true with money.  I started off my working career wanting to retire at 60 with over $3 million in my retirement account.  Then kids came along and Tracy and I realized we wanted her to be a stay-at-home mom for seven years.  We had planned on having her stay home for at least one year with our first daughter but, after this first year, we realized this was the right thing for our family and one year suddenly became seven.  We still invest for our retirements but our original plan is not going to happen now (unless I become a best-selling author ).  Does this make us a failure?  I don’t think so. We adapted our plans based on what we felt was the right decision for our family.

Many people have been thrown for a loop with the economic situation in our country.  Some have lost a job or racked up debt due to something that was unforeseen.  Should these people wave the red flag and surrender because plans did not go the way they envisioned they would?  Absolutely not!  The reality is many of our financial plans are not set in stone.  There are many things which could derail our plans that are completely out of our control.  Yes, we should have an emergency fund in place to help us deal with these things but please do not become discouraged and give up if something comes up that throws your financial trip off course; get a new map out and continue on your journey and remember there will probably be many more bumps along the road.

What do you think of this idea about adapting our financial plans to new situations?

That is all great and I love the motivation that goes into these goals, but why are they given up on so easily? Perhaps life gets in the way (we become too busy), or maybe some people find out their goals require too much work and sacrifice?

As you may know, I’m a fan of the Crown Money Map which is a Crown’s roadmap to true financial freedom. It’s simple and easy to understand and serves as a logical guide built upon a biblical foundation. It helps you get on the right path and most importantly, learn good financial stewardship.

But this journey, as you know, isn’t easy. It definitely requires sacrifice and it’s easy for people to sometimes want to give up. But, as you’ll learn in this video from Igniter Media, Achieve Goals with One Small Step, people can get overwhelmed by the big end goal of true financial freedom. Such a goal really involves too much to comprehend sometimes, doesn’t it? Rather, I like the message in this video of taking one small step. Make each day count. Do something that helps you move forward. Before you know it, you’ll be well on your way towards achieving your goals.

What do you think about this video and the message of achieving goals with one small step?

And here area few personal finance blog carnivals One Money Design was featured in:

Canadian Finance Carnival, Total Money Blog Carnival, Best of Money Blog Carnival, Family Finance Carnival, Carnival of Personal Finance, Carnival of Personal Finance, Carnival of Personal Finance, Carnival of Personal Finance, Yakezie, Debt Reduction, Debt Reduction, Debt Reduction, Save or Make Extra Money

• Will you pay off some debt?
• Give more?
• Do you think you’ll be able to save more?
• Perhaps some of you will increase your contributions to retirement accounts?
• Or, maybe you’ll reign in some bad spending habits and start learning to follow a monthly budget?

So, what’s it going to be?  I’m interested in getting some feedback from you and hearing about all the great things planned for 2011 and your journey to true financial freedom.

How about us?  Well, we’re still working on that emergency savings plan.  This past year saw us increase that savings and pay off our final car note.  Yes, we became debt free except the mortgage and we re now maximizing our emergency fund contributions for the first half of the year.  We hope to increase retirement savings after that.

To provide a little incentive to share your goals, I’m going to buy the first 5 readers who leave a comment a Crown Money Map, so you can get your year started off using a great tool!

How do you plan to improve your financial situation in 2011 and what goals do you hope to achieve?

Photo by jneandd

Goals help create the road map to financial freedom.  A lot people don’t believe in setting goals, but in reality, we all have little goals we set throughout each day.  You most likely have a goal to get out of bed in the morning (right?) get to work on-time and eat lunch.

These are all small goals set to help determine the course you’ll take for the day.  Well, financial goals are really no different.  Think about your goals as little steps to getting to where you want to go.  Sure, you have to have big picture goals for the future, but sometimes those can be overwhelming to think about.

Spend most of your time focusing on 1-2 short-term goals.  Before you know it, you’ll have those achieved and will be a little bit further along your financial journey.

Step 1:  Determine Your Starting Point, or Where You are Today

The best way to do this is to create personal financial statement.  You can download a template here.

Assets and Liabilities

In order to create a financial statement, you’ll need to identify all of your assets and liabilities.  An asset is something of value you own.  You may own a car, house, clothes, jewelry, etc.  Add up what you think all of these things are worth.  Liabilities are what you owe to someone.  You may own a car, but if you have a car payment, the total amount you owe to pay off the car is your liability.

Subtract your liabilities from your assets to determine your financial net worth.  Now, don’t worry if it’s low or even negative.  You’re going to set some goals to increase your financial net worth over time, so try to be patient. 

Step 2: Learn Some Characteristics of Financial Goals

Long-term and short-term financial goals

It’s important to distinguish between short-term (next 5 years) and long-term goals (beyond 5 years).  Short-term goals are the ones you’ll focus on the most.  It’s good to have 1 or 2 short-term goals that you’re focussing on at one time because anymore becomes overwhelming and your efforts might become dilutted.

It’s still good to keep in mind the long-term goals (how about achieving true financial freedom with no more debt and a fully funded retirement), but don’t let them overwhelm you right now.  Focus will be your best friend and key to achieving the long-term goals someday.

Goals Change at Differnet Stages in Life

Also keep in mind your financial goals may change depending on your stage in life.  For instance, many younger parents now have a goal to save for their childrens’ education.  But that certainly won’t be the case for someone in their 60′s.

Step 3:  Make a List of Financial Goals You Want to Achieve

Okay, it’s time to identify some financial goals.  As mentioned earlier, we have all have some goals, even if you’re not a goal-oriented person.

What are some examples of financial goals?  Here’s a hint:  common goals include to creating a budget, saving more money, becoming debt free and buying a house or car.  You might even have a goal to get spending under control.  Have you been to Starbucks, or the mall a little too much lately?

In determining your goals, here are some questions you can ask yourself to prompt some thinking:

• Do I have a budget?
• Do I need to establish or grow emergency savings?
• Do I have debt which I would like to pay off?
• Do I have children and plan to fund their college education?
• Do I have retirement savings?
• Do I desire to save for family vacations?
• Do I need to financially support other family members?
• Do I want to own or operate my own business?

Start making a list of the things you feel you need to accomplish.  It can be rough list at first.  Just get our pen to paper and list everything that comes to mind.

Your Values and Goals

Keep in mind the importance of values when it comes to goal setting.  Whether you realize it or not, your values, what you care most about in life, will determine what actions you take and your perspective on certain matters.  For instance, a Christian may value giving or tithing to the Lord as one of the most important financial goals.  Don’t dismiss what you care deeply about in creating goals.

What About Important Goals you Don’t Know Anything About?

While  you might be able to get some great goals listed, you may not know everything you need to accomplish.  That’s okay because you may not consider yourself a financial expert.  That’s where resources such as Dave Ramsey’s Baby Steps, or the Crown Financial Ministries Money Map come in [Note:  you can read a series on the Money Map and Baby Steps which provides information for both approaches].  They both provide great roadmaps to financial freedom and can give you some ideas of goals you need to accomplish.

SMART Goals are Important Too

After you’ve write them down, try to reword them into SMART goals which means:  specific, measurable, attainable, realistic and timely (when you plan to obtain it).  For example, I will pay off all of my credit cards in 1 year by getting a new part-time job, selling my boat and paying an extra $200 per month towards them.

Review and Update Your Goals Often

Once established, you should plan to review your financial goals at least once per year, but mostly likely every 6 months.  As mentioned, your goals will change based on different stages of life and certainly a goal might change within a year.

Step 4: Determine the Right Priorities for Each Financial Goal

Dave Ramsey’s Baby Steps are a great practical tool to help tackle financial goals in the right order and to get out of debt.  Again, you don’t want to dilute your efforts by trying to work on too much at once.  This oftenleads to very little forward progress and frustration and is why many people throw their hands in the air.

If you have a goal to get out of debt, find where it may be located along the Baby Steps.  In setting priorities, list all your goals in order according to Baby Steps.  You can also use the Crown Money Map for the same purpose.

1. $1,000 In An Emergency Fund
2. Pay Off All Debt With The Debt Snowball
3. To 6 Months Expenses In Savings
4. Invest 15% Of Income Into Roth IRAs And Pre-Tax Retirement Plans
5. College Funding
6. Pay Off Your Home Early
7. Build Wealth And Give!

Once you have your goals and have set the priorities, you’re read to start setting up a plan and tracking it.  You may even want to set up a 5 year financial plan to track the goals you’ll accomplish within those 5 years.

Pressing onward isn’t easy, but must be done to accomplish your financial goals. Here are 20 tips to fire up your turbo charger, avoid distractions and stay on track!

20 Tips To Turbo Charge Your Financial Goals

1. Forget what is behind. We’ve all experienced financial blunders and made mistakes. Stop beating yourself up over them! You can’t change what is in the past, but you can impact today and tomorrow.
2. Move forward to what is ahead. Know why your blunders and mistakes occurred and make sure you’ve dealt with the root cause. Next, step forward and take action on fixing the issue, i.e., getting on a plan to get out of debt.
3. Learn from mistakes. Never forget your mistakes and why you made them. Forgetting mistakes results in repeating them over again. Were you tempted to purchase something on credit without the cash to purchase? Did you act on the temptation? Do you regret it because you’re now making a monthly payment with high interest? Figure out what caused you to act and get it corrected.
4. Celebrate along the way. As you make progress, learn to take the time to celebrate. There are many steps and goals along the journey. It’s a long road, so don’t forget to celebrate the wins and include family and friends.
5. Find a way to give back. As you step forward, some will be a step behind. Don’t forget what allowed you to move forward and share with others what got you there. I’ve found that helping others along the way helps learn and become more motivated towards my own journey.
6. Ignore the naysayers. Many will question your methods and ask why. Dave Ramsey always says that people will think you’re strange and that usually means you’re starting to do things right! The bottom line is that it really doesn’t matter what others think or say. It’s you underlying values and reasons for the goal that make the difference.
7. Watch the horizon closely. Keep an eye out for things that can pull you off track to achieving your goals. A car that starts making funny noises, an older washer and dryer can all be things that could be on the edge of costing you money. If you think about them and can plan for them, you can avoid emergency spending.
8. Educate yourself. Learn from others and best practices. A great way to learn is to follow some personal finance blogs, or subscribe to a personal finance publication. I always like to investigate and explore information that is available based on my current goal.
9. Invest the right amount of time. Getting better at playing a sport takes practices. Improving grades requires studying. Improving your personal finances takes investment of time in managing your money, but also in learning. Investing a little bit of time each day adds up to a large return over time.
10. Don’t go at it alone. Make sure you’re using wise counselors along the way. Even if you’re not in trouble, it’s a good idea to find someone who can hold you accountable to your plan (other than yourself) and provide you counsel based on their experience or area of expertise.
11. Realize when it’s time to go to plan B. Paying off debt is important, but if you sense your job might be in jeopardy pausing debt pay off to further build your emergency fund may be required. The point is that you need to have a plan, but have the flexibility to change your plan based on circumstances.
12. Reflect often to maintain focus. It doesn’t do any good to lose sight of your plan. Once your plan for savings or debt reduction is in place, you need to review it often to make sure you’re following it. Understand things that have caused you to move off track and take corrective action to mitigate the risk of them occurring again in the future.
13. Make sure your visions have goals and your goals have plans. If your vision is to become financially free, determine the goals to get there. Build a plan to achieve each goal. If you don’t have any action steps to take to achieve your goal, you’re going to have a hard time taking a step forward.
14. Make it a community affair. When it comes to getting out of debt or overcoming past financial blunders remember there are many people out there trying to do the same thing. Hello! We’ve all made mistakes. Connect with a community of people who are traveling the same road and share the same passion.
15. Find your motivation in God’s word. The Bible is full of financial guidance and financial principles. There are over 2300 scriptures in the Bible related to finances. Feel down or lost about your money? Seek guidance and find peace and security in God’s money design.
16. Don’t talk about it, be about it. Finally, we’ve all spent time talking about everything we need to do. Stop talking about it and take action. Talking is great when there is action to follow it up. Talking without action is just a waste of breath.
17. Take a break. If all you’ve done lately is talk about money and personal finance, drop the subject for a while. Perhaps you’re burned out and your spouse is too! You’re spouse will probably appreciate it and it’ll help you rest your mind. Schedule the time to talk about your next objective when it’s a neutral time, there are no distractions and you can think clearly.
18. Brainstorm a solution. Not sure where to do? Play a brainstorming game. Spend 10 minutes writing every single (unfiltered) thought or potential solution to your challenge on sticky notes. Tip: find some friends and family to participate along with you. Put all the stick notes on the wall when time is up and organize them based on what seems realistic and achievable. Pick the top 2-3 and create action steps associated with them.
19. Listen to others talk about their situation. A few times a week I’ll listen to the Dave Ramsey Show. Nothing gets me more motivated than hearing people talk about challenges and Dave Ramsey directing them to the right path. Its powerful hearing so many people talk about how they want to become debt free and overcome their financial struggles.
20. Tell someone else about what you plan to do. There is something about making a public commitment. It helps us live up to our word and avoid the situation of having to tell someone you didn’t do what you said you were going to do. So, if you say to your friend you’re going to start a spending plan this month, or get out of debt in one year, be prepared for a follow up question in the near future asking you where you are with your goal!

Now go out there and make it happen!  What do you think about these tips?  How do you stay motivated to achieve your financial goals?

This is a post I published previously for Bible Money Matters.

Perhaps you need a guide to get on the right path.  Without a plan, or some sort of road map, it’s just too easy to get lost along the way.  And without having a plan in front of you it’s quite unlikely you’ll be able to stay on track.

I get excited when the subject of personal finance goals hits the table for discussion.  I love to think about the future when certain goals will be accomplished and our family will be a few steps closer to financial freedom.  That’s why out of excitement and just the need to have some personal accountability, I created my simple 5 year financial plan.  Yes, it’s simple and you can do it too!

I want to share more about my 5 year finanical plan with you because I think it can make a big difference in helping you make the next 5 years the most important in charting your course to financial freedom.

What is a 5 Year Financial Plan?

A 5 year financial plan captures all of the financial goals you will accomplish within the next 5 years.  For example, if you desire to become debt free, your plan will capture every payment required to pay off your debt.  If you’re trying to save for emergencies, it will capture every payment to your emergency fund.

Each goal gets assigned a column in a spreadsheet with the payments listed directly underneath.  As soon as one goal is accomplished, you roll your payments over to the next goal.  It’s very much like a debt snow ball.

The most important goals, or the goals you plan to achieve first, are placed in the columns furthest to the left.

How to Determine Your 5 Year Financial Goals

If you’re not sure where to start, one of the best ways to determine your 5 year financial goals is to look at either Dave Ramsey’s Baby Steps or the Crown Money Map.  Identify the first goal you have not yet achieved using either of these two approaches and start there.

For example, if you haven’t saved $1000 in emergency savings, this will be your first goal in the plan (first column of payments) and so on.

How to Use the 5 Year Financial Plan

Once you have your goals identified and built into the plan you’ll see a true picture of what you can accomplish in 5 years.  For me, this was a lot of weight off my shoulders because it removed uncertainty around our family goals and also brought visibility to the next 5 years.

As long as we execute the payments, to ourselves (for savings) or to pay off debt, and other circumstances don’t impact our progress, we know what we can accomplish in those 5 years.

Of course, there will probably be some hiccups along the way.  If that’s the case, I’ll make a copy of my baseline plan and update or adjust it based on the hiccup.  Note: I always like to keep a copy of the original plan to see how my results compare.

For example, we might have to use some money from emergency savings for something.  This would take us off track in trying to pay off our remaining car loan.  That’s okay.  We would just delay paying of the car loan to build back up emergency savings and reflect that in our new plan.

Benefits of the 5 Year Financial Plan

There are probably more, but I think these are two key benefits:

1.  Since you will have a visual report of where you’ll be in 5 years.  Having the ability to look at every payment that will be allocated each month to your goals can be a tremendous motivator.

2.  It’s easy to look back and say “where did the time go.”  Often we waste the opportunity to accomplish our goals when they aren’t written.  The financial plan is your 5 year roadmap.  It can be started today and you can avoid wishing you had allocated your money differently 5 years down the road.

How to Create a 5 Year Financial Plan

There really is nothing to it!  I’ve created a simple template in Excel you can use for your plan.  It includes every month for the next 5 years starting in 2010.  I think this is a great way to kick off your New Year, don’t you?

Click here to download my 5 year financial planning template

The plan includes sample goals based on a few of the Crown Money Map goals, but feel free to download it and make it reflect your personal goals.  You may even come up with some better ideas or additional features.  If so, let me know so that I can share with others!

Note:  I’m providing this template completely free because it’s been such a big help to me.  Let me know in the comments if you like it or have ideas for improvement.

Both plans provide great financial guidance.  I’ve been doing some thinking lately about highlighting the best of both (and some of my own ideas) and bringing them together in one list.   And this post will bring some of that thinking and brainstorming to a reality.

I wouldn’t say this changes course on what both Crown Financial Ministries and Dave Ramsey are saying with their plans, but I think it might allow one to consider additional steps or further options in working towards their objectives.

Money Map: things to do now

1. Create a personal financial statement (assets – liabilities = net worth) to get a clear picture of your net worth.
2. Create a spending plan or budget.
3. Track your spending against the plan on a daily basis for good personal cash flow management.
4. Execute a will.
5. Get an appropriate amount of life insurance.

The Best of the Money Map and Baby Steps

1. Save $1000 for emergencies.
2. Pay off all debt with the debt snowball paying smallest principle balances first.
3. Pay off a second mortgage if the balance is 50% or less of your yearly income (advice from Dave Ramsey I heard on his radio show).  Otherwise, second mortgages get paid off as you pay off your home.
4. Save up one month of emergency savings.
5. Take advantage of employer matching for your retirement plan as long as you can continue to make forward progress.   In other words, if your employer matches 50 cents on the dollar if you contribute 5% of gross income; go ahead and begin investing up to 5%.
6. Save up three to six months of living expenses for emergencies.
7. Begin savings for major purchases (home (20% down), auto, vacations, etc.)  Increase retirement contribution to 15% of income.  Begin savings for children’s education.  Emergency savings could also be built up to 6-9 months depending on your threshold for risk.  Obviously, there will be a lot of savings buckets created in this phase.
8. Buy affordable home if you do not already have one.
9. College savings funded.
10. Home paid off.
11. Retirement funded.  Continue to build wealth and give more, give more, give more!

I’m sure the above plan isn’t perfect,  As I mentioned, its not meant to be original, but I felt I needed to have a little more guidance around the savings area, in particular, that would define what we’re going to do with our money once emergency savings is funded.  Again, I tried to include what I liked about both the Baby Steps and Money Map in this post.

I think an interesting observation is that steps 1 – 7 could be done very early in life if you have the right motivation.  If  only I were in my twenties again!

What do you think about this plan?  Would you suggest any changes?

Is there a right or wrong answer or a better or worse solution?  You can see that both are clearly working towards the same objective of financial freedom or peace.  Both focus on savings and debt elimination which eventually positions one to build wealth and give more.  But more on that later.

Versus the right or wrong or better or worse question, it may be more appropriate to determine which approach works best for your situation.

I invite you to follow along with me in this series as I walk you through both plans, discuss my observations, hopefully,stimulate your thinking and raise some questions.  I’ll round out the series with some summary thoughts.

I plan to do one post for each phase (this one includes phase 1), so there will be 7 posts in total (including the summary post).

Disclaimer:  I’m a Money Map coach so you might expect a bias towards the Money Map.  I’m going to do my best to take an objective view point.  I’m not necessarily for the Money Map.  I’m all about finding what works best for the situation.

Baby Step 1 – Money Map Destination 1

What does the Baby Step say?

• Baby Step:  $1000 in an emergency fund

What does the Money Map say?

• Begin using a spending plan & save $1000 for emergencies.

Observations and Questions

• Crown suggests creating a spending plan as part of destination 1.  I think Dave assumes you have one when starting The Baby Steps.  I haven’t gone through Financial Peace University (FPU), so I’m not sure.
• Is $1000 the magic number?  I’m just curious as to what is so special about $1000.  I’ve only heard this number from these two sources.  Why not $1500 or $2000?  One thought is that $1000 isn’t a small amount of money, but it’s not big savings either.  It can probably handle most small to medium emergencies.
• Crown uses a scripture theme for each them which is pretty cool.  “The wise man saves for the future but the foolish man spends whatever he gets.” (Proverbs 21:20 TLB)
• Things to do sooner than later are also included on the Money Map.  I recently wrote an article on these suggestions.

What are your thoughts on this phase?

All the articles from the series:

• The Baby Steps and Money Map – Post #2
• The Baby Steps and Money Map – Post #3
• The Baby Steps and Money Map – Post #4
• The Baby Steps and Money Map – Post #5
• The Baby Steps and Money Map – Post #6
• The Baby Steps and Money Map Round Up

Many people dream of debt free day, or just think about having a balanced budget tomorrow.  Others have goals of paying for their children’s college education and some just want to help their children avoid the same mistakes they did.  

I often think about financial goals because knowing your goals and priorities is the foundation of every plan.  Think about it.  If you don’t have goals it’s difficult to determine spending decisions in your monthly budget.  Is your immediate goal to pay off debt or save for emergencies?  Without clearly establishing priorities you may not make the best spending decisions towards achieving your most important goals.  Therefore, everyone should know their financial goals and top priorities.

I sometimes visit CNN Money online and browse the content in their personal finance category.   I recently came across their Money 101 lessons and lesson 1 discusses setting financial priorities.  According to the article, there are 10 top things (summarized below) you should consider in setting your financial priorities. 

Top 10 things to know in setting financial priorities

Narrow your objectives

Decide on the goals that are most important to you and your family.

Focus first on the goals that matter

You can’t work on every goal at once.  Take the time to prioritize them and choose to work on the most important goals first.

Be prepared for conflicts

When goals conflict (you’re not sure which to tackle first), I personally recommend considering the priorities Dave Ramsey sets in his Baby Steps.

Put time on your side

If you’re consistent over time in your savings and investments they will grow.  The same could be said with following your plan to get out of debt.  The takeaway for me on this is to be patient.  Follow your plan and believe you will succeed.

Choose carefully

Choose the goals that matter the most to becoming a better steward of your money and building financial security for your family.

Include family members

Take the time to plan your goals with your spouse.  My wife and I try to sit down and review our goals once per year.

Start now

There is no better time than now to start managing your money wisely, setting goals and building plans to achieve them. 

Sweat the big stuff

Keep your goals in focus.  Consider other options, for example, if a large vacation may take you off track from paying off debt. Look for a less expensive way to relax.

Don’t sweat the small stuff

It’s okay to have some spending allocated for fun as long as you take your goals into consideration as you make spending decisions.

Be prepared for change

Goals may shift as stages in life change.  For example, we’ve learned there are plenty of expenses associated with having young children.  As the children grow older the types of expenses change.

Final thoughts

If you take away two things from this article, I would suggest setting the time to plan you goals with your spouse, if married, and start now.  Schedule time this week to list your goals on paper and priortize them!   

Can you think of other things to consider when creating your goals and setting your financial priorities?