Evaluating Your Relationship with Money
Before you start looking at the numbers, think about the emotional side of your finances. Write down your first experience with money and ask yourself how that experience affects your perception of money today. “It could be those childhood experiences and the relationship you observed your parents have with money,” Broadway said. “Did you see your parents struggle? Do you feel that it should be hard to earn money?”. Such a scarcity mindset can affect your thinking. For example, you might find yourself focusing more on the problems that money causes instead of the solutions it offers.
Knowing Your “Magic Numbers”
What is your income? What are your expenses? Knowing the answers to these questions might seem simple, but many people do not know those numbers off the top of their heads. “You should be able to state them as easily as you can state your name or your birthday,” Broadway said. “How can you be on a financial journey if you do not know your two magic numbers?”. While most people (86%) have a regular spending plan, only half of them answered “yes” firmly when asked about it in a recent survey by The Balance. The rest said “somewhat” that they follow a budget. Understanding the amount of income you earn versus the amount of spending you do – whether you use paper, a spreadsheet, an app, or a budgeting calculator – is fundamental to making good, reliable financial decisions.
Filter Your Goals
Every dream comes with costs, even when the terms discussed are not in the context of money. Let ideas flow, decide what is most important to you, and start working from there. “Think about what you want to achieve,” Broadway said. She gave the example of wanting to wake up every day and look at water, so she took that goal and decided what she could do to earn the money that would allow her to achieve that dream. “Write down these goals and make a list of the things you need to do to achieve those goals.”
Break Down Goals into Actions
It’s helpful not only to set goals but also to outline the tasks that need to be completed along the way. Again, Broadway shared a personal experience of wanting to have a month in which her business made a million dollars, so she broke it down into the number of clients she needed to secure and the amount of other sales necessary (like book sales) to reach that milestone. You can follow your own approach to goal setting, but any type of organization can help.
Each of these actions assists in understanding yourself better and the role money plays in your daily life. However, any of these steps may seem like a challenge, and that’s normal. Often, one of the hardest parts of any financial journey is actually getting started.
As for the fear of making mistakes, it’s part of the money culture too. “It’s better to do something rather than doing nothing,” Broadway said, specifically regarding investing.
Source: https://www.thebalancemoney.com/improve-financial-literacy-5179386
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