Whenever I speak with a person and their finances, my first question is: “What are your financial goals?” Some people want a house, others want an education, and many want retirement.
Here are some steps that will help you figure out your financial goals.
Figure out Your net worth
The first step to figure out how to get to a destination is to figure out where you are. In personal finance, you have to figure out your net worth before deciding how to get to where you would like to get.
Determining net worth is not difficult. The formula is assets – liabilities = net worth.
We don’t know what we want
The reality is that most people don’t know what they want out of life. The advertisers keep bombarding us with their messages and we lose track of our own thoughts.
For example, many people say: “I’d like to travel, but I can’t afford it.” And they never make a plan to fit traveling into their budget.
Many people borrow heavily for education knowing they’ll have a hard time paying back their student loans. They just do it because everybody else does.
The in-between
Many of us live in the “in-between.” The in-between is that uninspired space in which we are not satisfied with how things are doing, but we are not dissatisfied enough to do anything about it.
We are institutionalized
We are completely institutionalized. We are born in a hospital. As soon as it’s possible, we are placed into some kind of childcare facility, then we go from grammar school to high school, to college. We work in an office for 45 years, and finally, at age 65, we are allowed to be free for a few years before we’re put in another institution, to die quietly and away from the public eye.
We are exposed to advertisers all the time. We watch TV, listen to the radio, surf the Internet and look at billboards on the streets. Advertisers manipulate our way of thinking. We are told that in order to succeed we have to buy 4 years of education, get a mortgage, buy a car every 4 years, be up to date with the latest fashion trend and technology. Many of us live in that manipulated world for the rest of our lives. Very few make a conscious effort to get out.
We are addicted to our paychecks, and we are imprisoned by our mortgages. We willingly work at a job we don’t like in order to pay for a property which we don’t have time to enjoy. We see the other people, not as who they are, but as what they own.
We are not only shackled by our jobs, salaries, and debt but we are also shackled by our inability to see that there are other opportunities available. Our chains are not physical, our chains are mental, which is even worse because we become our own prison keeper. We see that pension at age 65, or the lottery, as our only way out and meanwhile we complain about the system, the government, income inequality, and so on.
We are the system. We are the 1%
But we don’t realize that we are the system. We keep the system alive by following the rules as we are told, by our aversion to uncertainty. We would rather be unhappy than face uncertainty. So we take a path that we don’t like because we fear the path we don’t know.
We live a life of material abundance, we are consumers. We complain about income inequality but only when others earn more than we do. We are the 1%. We are considered successful when we are perceived to spend more than our neighbors.
We are considered successful when we spend money. We prefer riding 20 minutes to work by car than riding 20 minutes by bike. We give higher value to the person who has a garage full of stuff than the person without a garage and no stuff. I see people spending $5000 on bicycles that are 2 pounds lighter, instead of just losing two pounds. We pooh-pooh the idea of public transportation and instead spend $40K+ buying a car that pollutes our environment.
It doesn’t have to be this way
It doesn’t have to be this way. We could do things differently. For example, how about if we could get our education for free just by going to the local library or by taking free courses on the Internet? We would get rid of student debt.
Rather than working more to have more stuff, how about if we own less stuff in order to work less? Can we trade cars for bicycles? Can we do away with TV and cable? Do we really need to buy Apple gadgets every year?
Here are some suggestions:
- We can start by accepting personal responsibility. Instead of blindly following the system, we should realize that we are prisoners of our own culture and behavior. Just like the alcoholics who recognize themselves as alcoholics, we have to recognize that have been active jailers in our own prison. We bought that iPhone on credit, we purchased that education which we are not able to afford now nor in the future, we continue living beyond our means.
- We can increase our dissatisfaction with the present situation. Instead of accepting things as they are, we can increase our displeasure of the situation to the point of where we are forced to do something to change our present environment.
- We have to visualize life outside of the system by reading and educating ourselves about all the different alternatives.
- We have to build a plan to change our life. Set a series of milestones which you will able to achieve by a set time period.
- Take action. Don’t postpone the changes in your life, build that plan and start taking little steps or big steps toward that better financial and personal life.