- Continuing our series on lessons learned from coaching clients
- What happens when we attempt to do several things at once with our money
- The power of focus with our money
- Why I love the Baby Steps so much
- Quote of the lesson from George Horrace Latimer
When it comes to the way we handle our money most of us are trying to manage it the best way we know how. I rarely run into someone who is just flying by the seat of their pants when it comes to how they handle money.
However a lot of us are trying really hard but feel stuck in our current situation. That leads to feelings of frustration, embarrassment, and shame that we can’t figure this whole money thing out.
Now there is no one size fits all solution to everyone’s problem. But I have noticed that a lot of times we feel stuck with our finances because we’re trying to do ten different things at once. That is the reason why we feel stuck and hopeless.
Some common examples of the many things we are trying to do include
- Becoming Debt Free
- Saving up for the down payment on a house
- Saving for our child’s higher education
- Taking a trip
- Emergency Funding
- Investing for retirement
Now after going through the list, you’ll notice those are all good things to be doing! In fact I encourage you to do all of those things. But it is really hard to do all of those simultaneously and impossible to get all of those done at once.
That’s because money is finite. It’s hard to get traction when you are doing a little bit here and little bit there. You never see any wins or improvement and getting wins is a big key in getting the momentum necessary to keep going.
It also leads to not being very consistent with your money as you are constantly jumping from one money fire to the next. This easily leads to you becoming derailed in the pursuit of your goal.
Rather than do ten things at once, I coach people to step back and reflect on what's truly important in the moment and focus all your attention on that one thing.
By focusing on one thing at a time you are going to see improvement in that area right away. That will keep you motivated to continue to pursue it. It will also lesson the time you are actually doing that goal and soon you’ll be able to move on to the next item on your list.
There is an incredible power to having your money focus solely on one or two main goals. We often think slowing down and doing just one thing at time doesn’t help out. But there is actually a multiplier effect when a singular focus is present.
That’s why I love the baby steps so much. It sets clear guidelines on what to focus on and in what order. In case you aren’t familiar with the baby steps here they are in order.
- Save $1,000 in an emergency fund
- Pay off all your non-mortgage debt using the debt snowball method
- Save 3-6 months’ worth of expenses in an emergency fund
- Begin to invest 15% of your income into retirement
- Save for your children’s education fund
- Pay off your mortgage
- Build Wealth
You start with saving $1,000 as your first goal. You don’t do anything else with any extra cash. You don’t pay any extra on your debt, you don’t invest, and you don’t go on vacation. You save $1,000.
Then you pay off your debt, one at a time. You don’t still don’t invest, go on vacation, or save up a down payment on a home. You put all your extra money on your smallest debt. Then the next smallest debt, and on down the line until you are debt free.
Now are you going to be doing just one thing with your money for the rest of your life? No, eventually once you are debt free and have an emergency fund that is when you can do things like invest in your retirement, save for your children’s education, and travel.
We have good intentions when we try to do 10 different things at once, we really do. But that is not the way to get control of your money. It’s a good way to get frustrated and become frustrated.
Today's quote of the lesson is brought to you by the JW's Financial Coaching Newsletter
“He who buys what he does not need, steals from himself" ~George Horrace Latimer
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