If we want to lose weight, we know the obvious answer, and it’s one that has not changed over time. The plan? Watch what we eat and get plenty of exercise. An effective financial diet works in exactly the same way, and the analogy could not be more appropriate.
To get started, we need to get on the scale and find out where we stand right now. That gives us a quantifiable starting point, against which we can track our progress in the months ahead. How do we do that? Stepping on the scale financially means that we need to complete a personal financial statement (PFS). Forms are available at your local bank or online though numerous websites. Here is one from my friends at Entrepreneur.com
Once you have completed the PFS and faced the often-harsh reality of your current financial condition, it’s time to set some goals. To be a meaningful goal, it will need to have three key attributes. First, it needs to be MEASURABLE. It must be something we can quantify, in most cases in dollars. Next, it must be ACHIEVABLE. Why? If we set a goal that is something that is completely out of reach, once we realize it is unachievable, we lose our motivation to try. Finally, in order for a goal to be a valuable motivational tool, it must have a TIME FRAME. Think about it. My goal is to have a million dollars! By when? Next week? Probably not. A time frame puts our goal on a timeline for achievement and reflects our expected schedule for achieving it.
What about exercise for our diet? If you will pardon the pun, on your financial diet, the exercise that is most important is that you “exercise” good judgement! That means establishing a budget and making sound financial decisions, from paying down those high interest rate credit cards to spending cash for regular household purchases.
After just a few months – guess what? Step on the scale and take a look at your personal financial statement. Congratulations! Your financial burden has just gotten much lighter… and your future much brighter!