Money may not be the most important thing in life, but it’s way up there with oxygen.
One of your biggest responsibilities in life, something that you and only you can take care of, is to manage your money, control your finances, and achieve financial independence in the course of your working lifetime.
This is not something that can be left to chance. The acquisition and deployment of money is governed by specific rules, principles, laws, and factors that are immutable and unchanging. Just as if you wanted to learn medicine, mechanics, or law you would have to study the subject in detail for a long time in order to master it, you must give a lot of thought to money and finances or you will have shortfalls and problems in these areas all your life.
Avoid self-delusion. Many people who have tried and failed to achieve their financial goals fall into a mental trap where they rationalize their failures and frustrations by saying, “I don’t really care that much about money. I am a superior type of person who is more concerned with higher things.”
My friend Harv Ecker famous for his “Millionaire Mind” seminars, hears this all the time. Whenever people say to him that they don’t care that much about money, he responds by saying, “Oh, you’re broke, are you?”
It turns out that almost all people who “don’t care about money” are broke and so preoccupied with money that they think of little else. The tragedy is that these people have given up on themselves and their ability to ever achieve financial independence.
The starting point of taking complete control over your financial life is for you to set a series of short, medium, and long-term financial goals; make plans for their achievement; and then discipline yourself to follow your plans, no matter how difficult or distant your goals.
You can use the twelve-step process for setting and achieving your financial goals that I described in chapter 6—starting today. These steps have been tested and proven with more than a million graduates of my multiday seminars on success and achievement. The cumulative result of following these steps is that you will develop a new mind-set regarding yourself, money, and your financial future. You will then go on to accomplish more in your financial life in the years ahead than many people accomplish in an entire working lifetime. Let us begin.
The starting point of goal achievement in every area, including money, is desire. The two most important questions you must ask and answer are,
1. What do you really, really want?
2. How badly do you want it?
Friedrich Nietzsche, the German philosopher, wrote, “He who has a why to live can bear almost any how.”
Practice idealization. Imagine that you have no limits on what you could be, have, and do financially in the years ahead. Imagine that you have all the time and talent, education and experience, and friends and contacts that you could ever need. If this were your situation, what financial goals would you set for yourself?
Most people are completely immersed in their current financial situation. This is usually characterized by indebtedness, ongoing bills and expenses, and an income that is insufficient to enable them to think very much beyond the present. When you are in debt, it is hard to set exciting financial goals for yourself and your future.
To free yourself from this mental limitation, imagine that you could wave a magic wand and achieve all your financial goals sometime in the future. What would they be?
Set short-term financial goals for yourself to get your spending under control and get completely out of debt. Set medium-term financial goals for yourself to save and invest 10 to 20 percent of your income, purchase a home, set up a trust fund for your children’s education, and get your financial life completely under control. Set long-term goals for yourself to build up a financial estate and eventually achieve financial independence. Your ultimate goal is to reach the point where you never have to worry about money again.
Your beliefs become your realities. You must be sure that your financial goals are believable, achievable, realistic, and aligned with your true values.
Your financial goals must be believable in that they are in harmony with your current reality. Set financial goals that force you to stretch out of your comfort zone but that you can get your mind around. For example, instead of deciding to double your income in one year, set a goal to increase your income by 20 to 30 percent over the next twelve months. Because this is a reasonable and believable goal, it can motivate you and give you a focus for your activities.
Your goals must be achievable in that you know that you have the talents, abilities, and discipline to do what you need to do to achieve those goals. For example, it is possible for you to be financially successful by starting and building your own business, but this process takes five to seven years of hard work and experience before you begin to realize the rewards that are possible for you.
Make your goals realistic in that they are consistent with your current situation, your current level of skill and ability, and what is happening in the world around you.
Finally, be sure that your goals are aligned with your true values. You will be happy on the inside only when you are working at something on the outside that is in harmony with what is truly important to you.
The act of writing is a psychoneuromotor activity. This means that when you write down a goal of any kind, you activate your emotions, your intelligence, and your physical body. Writing a goal down with a pen and paper activates your visual, auditory, and kinesthetic senses. Writing the goal down on paper programs the goal into your subconscious mind, where it takes on a life of its own, working away twenty-four hours per day.
Be specific about the exact amount of money that you want to earn in the coming year and in the next five years, year by year. For example, set a goal to increase your income by 25 percent each year for the foreseeable future.
Determine your long-term financial goal, the amount you want to accumulate over the course of your working lifetime. Your long-term financial goal is called your “number.” This is the number that you must achieve to reach the point where you can retire comfortably, when work becomes optional for you.
The best way to calculate your number is to determine exactly how much it would cost for you to live comfortably for one month if you had no income at all. Multiply this number by twelve to determine how much you would have to have put aside to live comfortably for one year without working and without income. Finally, multiply this one-year number by twenty, the number of years you are expected to live after retirement, to get your number.
For example, if you require $5,000 to live comfortably for one month without income, multiply this by twelve to get $60,000, and then multiply this number by twenty to get $1.2 million. This number then becomes your long-term financial goal. Each month, each year, analyze your financial situation and determine how close you are to, or how far away you are from, achieving this long-term financial goal.
An essential part of making your goals realistic, believable, and achievable is conducting a complete financial analysis on yourself and your life today. Exactly what is your current financial situation?
Imagine that you were going to sell all of your possessions, transfer everything you own into cash, and move to another country. Exactly how much cash would you have if you sold everything you have today?
Create a financial statement for yourself. This is simple. Make a list of all of your assets and their cash value today. Then make a list of all of your liabilities, your debts and bills, as if they were all payable today. Deduct your liabilities from your assets to get your net worth.
Whatever your net worth is today (and for many people it will be negative), this becomes your starting point. When you are both clear and honest about your current financial situation, it becomes easier to move ahead and change it.
Reasons are the fuel in the furnace of achievement. The more reasons you have for achieving your financial goals, the more motivated you will be to get started and to keep going. The more reasons you have, the more persistent and determined you will be. The more reasons you have, the more you will be willing to move out of your comfort zone, take risks, and move ahead more aggressively. People succeed greatly because they have big, exciting reasons that propel them forward.
Make a list of all the wonderful things that you could do in your life, for yourself and your family, if you earned more money, got out of debt, and achieved financial independence. Especially, how would you feel emotionally when you achieved your financial goals? Would you feel happy? Confident? Proud? Peaceful? Excited? Joyful?
When you combine the thought of achieving a financial goal with the emotion that achieving that goal would generate, you double and triple the goal’s motivating power to drive you onward and to keep you going in the face of adversity and disappointment.
Based on your financial analysis and your current situation, you can now set a realistic, long-term date for each of your financial goals, including your ultimate goal of financial independence.
Set a date for exactly when you intend to be debt-free. Set dates for when you plan to begin saving 5 percent, 10 percent, and 20 percent of your income each month. Set dates for your short-term, medium-term, and long-term financial goals. A decision without a deadline is largely a waste of time.
What are the main obstacles or difficulties that stand in your way and hold you back from achieving your financial goals today? Of all the obstacles holding you back, what is the biggest or most important?
What are the key constraints or limiting factors that determine how much you earn, save, invest, and accumulate? A constraint is something that sets the speed at which you achieve your financial goals. This is the factor that holds you back more than anything else.
The 80/20 Rule applies to constraints in a special way. It seems that 80 percent of the reasons that you are not achieving your financial goals lie within yourself in some way. What is holding you back in most cases is the lack of a skill or skills, the lack of discipline, or a character weakness of some kind. What could it be for you?
Ask this question: “Why haven’t I already achieved my financial goals?” In other words, what are your favorite excuses, rationalizations, and justifications for not earning the amount of money you want to earn, for being in debt, or for not being financially independent? Your answers to this question can tell you a lot about where you are and what you need to do to create your desired future.
To achieve a financial goal you have never achieved before, you will have to acquire knowledge and develop a skill or skills that you have never had before.
What additional knowledge will you have to acquire to achieve your financial goals? What additional skills will you have to develop? Of all the knowledge and skills that you will require, what are the most important? What is your plan to acquire this knowledge and to develop these skills?
Your earning ability, your ability to get results for which people will pay you the kind of money that you want to earn, is central to your achievement of your financial goals.
Look around you. Who is earning the kind of money that you want to earn? What are they doing differently from you? What special skills or abilities do they have that you currently lack? If you are not sure, go and ask them. In most cases, they will be pleased to tell you.
Make a list of all the knowledge and skills that you would have if you were one of the top people in your field and one of the highest paid. Organize the list in order of priority, from the most important to the least important. Take action today to begin learning what you need to learn to achieve the financial goals that you have set for yourself.
Identify the people in your work life who can help you and whom you can help in return. Make a list of the names of people such as your boss, your coworkers, and your peers. List your customers, suppliers, vendors, and sources of money.
To achieve anything worthwhile in life, you will have to have the help and support of lots of people. The way you get their support is by becoming a “go-giver.” Look for ways to help other people, to earn their support and cooperation, before you ask them to help you.
In life, most people function on the basis of the “expediency principle.” This principle says that people tend to seek the fastest and easiest way to get the things they want immediately, with little concern for the long-term consequences of their actions.
Put another way, people act to benefit themselves and think of themselves and their interests first and foremost in most situations. Your job is to think in terms of how others will benefit from cooperating with you to help you achieve your goals.
You will also need the cooperation and support of the members of your family. If you are going to have to work long, hard hours to achieve your financial goals, keep the members of your family informed. Explain to them how they will benefit. Plan rewards, gifts, and vacations around accomplishments of financial milestones in your life. Be sure that everyone close to you is on board with you in the achievement of your financial goals.
To get the help and cooperation of others, you must continually tune in to each person’s favorite radio station, “WII-FM?” (What’s in it for me?).
You have now determined what you want, where you are starting from, and when you want to achieve each of your goals. You have determined the obstacles that you will have to overcome, the additional knowledge and skills that you will have to acquire, and the people and groups whose cooperation and support you will need. You are now ready to develop your plan of action.
Based on the above information, make a list of every step that you will have to take to achieve your financial goals. Organize the list by sequence—what you will have to do before you do something else and the order in which you will have to take these actions.
Organize your list by priority as well. Determine what is more important and what is less important by using the 80/20 Rule. Discipline yourself to start work first on those activities that are the most important of all, and put off other activities until later.
Now you have a goal and a plan. By gathering the above information and thinking through your answers to these questions and putting them down on paper, you increase the likelihood of your achieving your financial goals by ten times, by more than 1,000 percent. You now have a road map and a schedule to guide you and against which you can compare your activities and your successes.
When you set off to achieve financial independence, it can seem like an overwhelming task. But when you break down your large, long-term goals into small, bite-sized pieces, the task becomes far more realistic, believable, and achievable.
You may not be able to achieve the whole goal at once, but you can take a single step, and it is your willingness and ability to take the first step that makes everything else possible.
You have to see it before you can achieve it. The greater clarity you have with regard to how your life will appear when you are financially independent, the faster you will move toward your goal and the faster it will move toward you.
One of the actions you can take to enhance your power of visualization is to create a “financial freedom poster.” Get a large poster board or whiteboard that you can look at on a regular basis and begin to cut out pictures of the different things you would have in your life if you were already financially independent.
Cut out pictures of homes, cars, boats, vacation destinations, clothes, jewelry, furniture, and everything that you come across that you would like to have in your life sometime in the future if you had no financial limitations at all. Put a picture of yourself, or yourself and your family, in the middle of this poster and tape all these pictures in the space surrounding your photograph. Look at this poster regularly. Imagine that everything that you can put up on this poster is ultimately achievable for you.
It will only be a matter of time before you create it or attract it into your life. Imagine how you would feel, living in that particular house or taking that particular vacation. As you allow your eyes to wander over your pictures, create within yourself an attitude of calm, positive expectation that everything will be realized at exactly the right time for you.
Once you have determined your financial goals, resolve in advance that you will persist until you succeed. Make a decision that you will overcome every problem, setback, difficulty, and adversity until you finally win through and achieve your financial goals.
Remember, when you set a big goal or set of goals for yourself, you are setting yourself up for frustration, failure, setbacks, difficulties, and temporary defeat. These experiences go along with the territory. It is impossible to succeed without these failures.
However, the good news is that within each obstacle or setback will be the seed of an equal or greater advantage or benefit. Every problem or difficulty you experience will contain a lesson that, once learned, will help you to achieve your goals more surely in the future. Your job is to focus on the lesson and what you can learn rather than on the problem and how it might be holding you back.
There are no limitations on what you can achieve except for the limitations that you place on your own mind. Difficulties come not to obstruct but to instruct. When you resolve in advance to learn from every experience, your ultimate financial success becomes inevitable.
1. Determine your exact net worth today so that you are clear where you are starting from.
2. Decide exactly how much you want to earn per hour, month, and year in the next one, two, three, four, and five years.
3. Create a plan to get out of debt by living on less than you earn. What expenses are you going to cut back?
4. Decide how much you would need to live comfortably each month if you had no income at all, and use that number as the basis for your financial planning.
5. Begin to study and learn about money, how to earn more of it, and how to make it grow.
6. Ask other successful people for advice, especially before you invest any of your money in a business or in real estate.
7. Set a goal to save 10 to 20 percent of your income for the rest of your working lifetime. Make financial independence a top priority.