Do you know where you want to be in 20 years? What does that picture look like?
When facing debt problems, it is very important to envision what you want your financial life to look like in 20 years. Because when you fail to have a clear vision of what the ideal life looks like, you tend to repeat the present problem. Sure, you may get out of today’s financial mess, but then old habits return and the problem resumes.
When facing that life changing debt struggle, it is very important to write down very specific financial goals. Very specific goals.
- I want my home paid off by age 55.
- I will save up 6-months of wages in a savings account.
- I want to take my grandchildren to the beach every summer until I die.
- I want to quit my full-time job by age 60 and then work part-time and volunteer more.
- I want to travel while I’m still young and healthy.
- I want my student loans paid off before my kids start college.
Why is this important? Because knowing where you want to end up instructs you on what you need to do today.
Want to loose 10 pounds by summer? Then start walking 1 mile today, 2 miles tomorrow, and eat a healthy diet.
Want to pay off the home in 10 years? Well, you have 260 paychecks to get the job done if you are paid bi-weekly. So, how much a paycheck does it require? (Find out here.)
Want to take a 2nd honeymoon in Cancun, Mexico in 12 months? How much a paycheck does that cost?
See what just happened? Your long-term goal affects what you do now. That is why it is so important to set long-term financial goals. Without them, you lose track of how to spend that paycheck.
When deciding about whether to file bankruptcy, keeping those long-term goals in mind is important. Sure, you could opt for a debt repayment program and become debt free over 5 years, but will that undermine the long-term goal of paying off student loans or a mortgage?
Solving today’s temporary financial problem is only part of the analysis. Most people underestimate what they can accomplish over a long period of time. The difference between paying off a mortgage over 15 years instead of 30 years is usually about $100 per month. That’s really not much more, so why not do it? A lousy $20 investment per week in a 401(k) plan yields a substantial retirement. Eating 100 few calories per day results in substantial weight loss over a year.
Tell me where you want to be in 20 years and I’ll tell you what you need to do with your money today.
There is only one day in your life that you have power over money, and that day is payday. What you do or fail to do on payday determines whether you win or lose. Decide to win today.