Key To Success: Get Organized Financially
If you’ve ever witnessed or even participated in a catch-a-pig contest, it can be quite exciting. The chaos of watching – and hearing – little pigs trying to outrun little kids is truly something to behold. The pigs clearly don’t want to be caught while the kids enjoy what seems like an easter egg hunt with squealy and fidgety little animals serving as reluctant prizes.
If you’ve ever tried to sit down and finally get organized with your finances, it can feel a lot like catching a pig. As soon as you think you’ve got it, you quickly find out that you…don’t got it. And why are both of these tasks so hard to accomplish? I think it’s because you’re working with a very much moving target.
Finances are summarized in documents with names like cash flow statements and balance sheets. One depicts the flow of money through your life and the other implies that you’re trying to balance something; in this case it’s assets and liabilities. These are ‘motion’ words. They represent our best attempt to freeze the flow of money and to freeze time in such a way to assess our financial health. And while these are very valuable measures to take to discern financial health, as soon as the numbers are committed to paper, they’re wrong. The market has gone down or up, the gas meter has advanced due to your house being heated, or food has been consumed requiring yet another trip to the grocery store. Money simply flows and it never stops flowing. So, like a lightning-quick young pig, money doesn’t lend itself to accurate snapshots in time.
So what do we do if we want to get better setup financially? Here are some tasks for the aspiring organizer of finances:
- Gather a list of – and as-current-as-possible balance of – all your financial accounts. This should include credits cards, bank account statements, loans, investment statements, pension summaries, Social Security benefits estimates, Kelly Blue Book value estimates of cars you own, cash balances on-hand, Zillow.com estimate for the value of your home, life insurance statements, and anything else you can think of that would help measure what you own or owe.
- Summarize a month or two of spending. By looking at credit card and bank statements, you can see most of the spending that you do. If you use cash regularly, do your best to recall how much you’ve spent and where you’ve spent it.
- Brainstorm a list of all purchases you plan to make in the next month or two.
- Looking at each statement you’ve gathered, ask yourself, “How do we intend to use this money, and when do we intend to use it?”
- If you have consumer debts like credit cards and car loans, write them on a single piece of paper from smallest balance at the bottom and largest balance at the top. This is the beginning of your ‘debt snowball’ if your plan is to payoff debt as quickly as possible.
With all of this information gathered, make a decision to either 1. Decide what next steps you should take to turn all of this information into meaningful action, or 2. Come see us to do the same. For it’s one thing to have gathered all of this information in one place (congratulations!) but it’s a completely different action to turn that information into forward progress.
The key to dealing with a moving target is to know where you are first relative to the target, then determine directionally where you’d like to go in the end. From there, you can better see the next step and the next after that, leading to the desired end point. As hockey great Wayne Gretzky said, “I skate to where the puck is going to be, not where it’s been.” I suppose someone has a great pig-catching quote as well, but I won’t bore you with it.
Knowing where you stand and where you’re headed financially is a wonderful feeling. It really isn’t easy to get organized but the process alone reveals a lot about your standing and likelihood of meeting your longer-term goals. That little piglet isn’t going to sit still very long nor is your money, so let’s do our best to restore some order and find some peace again.