Reaching financial stability can seem like a daunting lifelong journey, but it really doesn’t have to be.
Yes, there are details among details within subjects like credit, consumer protection, investing, and homeownership, there’s no doubt about that.
But, what if you took a step back and reconsidered the way you view the journey?
Instead of getting buried in the weeds of each individual topic, consider reaching financial stability through more of a conceptual approach.
Your past, present, and future.
That’s it; three main periods of time.
By finding balance and winning at the three major periods of the life span, you can and will reach financial well-being.
This probably sounds vague, so allow me to further explain.
Your past is all about the financial decisions you’ve already made.
This includes both the decisions that were positive, and the ones that may have hindered your progress, such as various forms of debt.
If this sounds familiar, you aren’t alone as literally 300 million people have some type of debt. Don’t worry, I am included in that figure as well (thanks, mortgage).
While having debt is “normal”, the goal is not get stuck in it like so many “normal” people do.
The goal is to live a life of strong financial health, comfort, and happiness. And in order to reach that, you will have to clean up your financial past.
The more money you spend on debt payments from decisions you made 1, 5, and 10 years ago, the less money you have to take pleasure in the joys of today. Not only that, it’s less money you have to prepare for tomorrow.
So, before you can experience a life of financial flexibility, you may need to do some cleaning.
Here’s how you can clean up your past:
- Reframe previous debt decisions into SMART goals
- Pay off debt using the debt snowball
- Shift your mindset. Those previous decisions don’t define you nor are they your identity.
What are your current obligations and bills?
What type of decisions are you making today?
How are you maintaining your current standard of living?
In other words, your present is about how you are managing your finances on the daily basis.
But here’s the trap that 78% of American workers have fallen into: living paycheck to paycheck.
Just like the pitfalls of getting stuck dealing with past decisions, getting stuck in “day to day” can be just as damaging to your future.
Living paycheck to paycheck doesn’t provide any financial wiggle room to save for emergencies, invest in passions, or set aside for retirement. In other words, living paycheck to paycheck essentially mutes future you.
If you let it, the check to check cycle will swallow you up for years.
Here’s how to break out of the cycle:
- Create and use a spending plan/budget
- Utilize the concept of planned purchasing
- Build and maintain your credit
- Find creative ways to make extra income
Time is going to tick whether or not you accept that reality.
As much as you should “live in the moment”, you shouldn’t do so while completely neglecting the future.
Specifically, you can’t neglect future you and the “what if’s” of tomorrow.
Tomorrow refers to your short term and long-term goals, unknown challenges, visions, passions, and opportunities. By financially setting up future you, you pretty much lock in your ability to meet any of these elements without worry.
- How would you feel knowing that if your car broke down next week that you could pay for any repairs in full?
- What if you knew you could absorb the shock of a job loss for 6-8 months without feeling financially strapped?
- Wouldn’t you love to be able to have the money on hand to invest in that new business idea without going further into debt?
These are just a few of life’s curveballs and opportunities that can be thrown at you. By prepping future you, you will confidently knock them out of the park.
Keep this in mind: For most of us, 5 years ago felt like yesterday. 5 years from now is going to show up before you know it.
How to set up future you:
- Establish visions, motivations, and goals
- Build your Emergency Fund
- Take full advantage of employer-sponsored retirement options
If you reframe your financial journey in terms of cleaning up the past, taking care of the present, and preparing for the future, it simplifies it.
But you have to be dedicated to all three. Neglecting any one of the areas will not get you where you want to be, financially.
Strive to find a balance between them by living a life based on intentionality.
When you reach that balance, achieving and experiencing financial well-being will fall right into place.