In my last blog post, I focused on looking at restructuring your finances as an opportunity instead of a burden. This week, I’m going to discuss a very important first step when approaching a financial overhaul: reflection.
Reflection may not seem like an important step, but it’s actually at the very heart of a financial rework. If you don’t know where you’re going, how can you plan the steps to get there? If you don’t have a clear vision of your ideal future, how can a financial planner help you create a roadmap?
Start by simply taking the time to think about your big goals in life.
These goals may or may not be directly related to finance. Maybe you want to go back to school or purchase a new house or buy a lake home. Maybe you want to spend more time volunteering in the community. Or, maybe your goals are directly related to finance (such as increasing your yearly investments or developing an emergency savings fund). Whatever the case, it’s a good idea to spend some time in quiet reflection, picturing your perfect future.
Then, start discussing your ideas with your family. It’s possible that children or parents have a stake in your financial planning, but it’s more likely that your significant other will be the one who is most involved in your financial decisions. Sit down and begin discussing your goals (both financial and non) and figure out where your interests align and where they are different.
If your differences are financially-based (i.e. your spouse wants to invest more money in the stock market, but you want to prioritize paying off your credit card bills), a financial planner can help guide you to make the best decision for your situation.
You’ll also want to reflect on your personal spending habits and how they fit with your goals.
Are there areas where you can cut back spending? Are your current expenditures necessary? Do they help or hinder your path toward your goals? Make sure to consider things you take for granted, such as going out to dinner every night or buying designer work clothing when a generic brand will suffice.
If you’re a visual person, you may want to sketch out your goals in the form of a mind map, or even post a photo of your most important goals (a new car, more time to volunteer, a fully financed college fund, etc.) over your desk or by your bed. This will keep your aspirations front and center and help remind you of why your financial overhaul is so important.
Once you have spent time reflecting on your goals, you’ll be nearly prepared to meet with a financial advisor. I do, however, suggest tackling one more step before you even walk into your financial planner’s office. I’ll write about that step in my next blog post. Stay tuned!