This is a guest post from Jacob at My Personal Finance Journey as part of the Yakezie blog swap. This week, everyone wrote about what motivates them to be financially responsible. You can view my post at Jacob’s blog too by clicking here.
[***On June 11-12 this summer, Jacob will be doing a two day MS150 bike ride event to promote awareness for multiple sclerosis disease and to raise investments for MS research and support programs. If you are interested in helping out with a tax-deductible donation, please click on his donation page link. Just $10 will make a world of difference!]
Howdy folks! It’s a pleasure to be guest posting on KNS Financial today as part of the 5th Yakezie Blog Swap!
There are three main things that motivate to be financially responsible beyond all else – 1) achieving my Purpose Focused Financial Plan, 2) keeping a running financial/net worth progress update each month and making adjustments to maintain my asset allocation targets, and 3) communicating the results with the blogging community.
Let’s tackle what each of these things are one-by-one below.
1) Achieving My Purpose Focused Financial Plan
This is a system that I adopted after reading David Bach’s book, “Smart Couples Finish Rich.” A Purpose Focused Financial Plan is a very interesting personal finance strategy that David adopts with the people he advises in his financial planning business.
If you haven’t read it already, I would strongly recommend that you pick up a $0.01 (cheap!) used copy of the book from Amazon – Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner.
Essentially, what the strategy is all about is that people/couples should plan for their specific values and life dreams, as opposed to planning what material possessions are needed for life (can be easily influenced by contemporary culture).
Executing the strategy involves the four steps shown below:
- Define the 1) importance and 2) purpose of money in your life.
- 1) Involves ranking the importance of money in your life on a scale from 1-10.
- 2) Involves a qualitative description of how you view the role of money in your life.
- Determine and take action on your life values.
- Your life values action plan is based around goals that you specifically want (and one could almost say need) to do in your life in order to be fulfilled.
- Determine and take action on your life dreams.
- Your dream action plan is based around “fun” things that you want to accomplish in life that will enable you to live an extraordinary life, based upon your standards.
- Place your dream and life values savings on autopilot.
- This involves setting up savings vehicles to ensure that your values and dreams are met.
Basically, the overall goal of a Purpose Focused Financial Plan is to live a more proactive life, instead of just responding to whatever the environment around you throws your way. Once you have defined your Purpose Focused Financial Plan, it is important to review it once per year to see if your life values and dreams have changed.
Having a plan to follow and revisiting my goals once per year very much helps me keep on track financially.
You can view the complete description of how I set up my Purpose Focused Financial Plan by clicking the following link – My Personal Finance Journey’s Purpose Focused Financial Plan.
2) Tracking Net Worth and Financial Goal Progress Each Month
After setting up my Purpose Focused Financial Plan and reviewing it once per year (in step #1 above), the next thing that I do is to create short-term, mid-term, and long-term goals that reinforce my Purpose Focused Financial Plan.
Then, on a more frequent, monthly basis, I track 1) my progress on all of these goals and 2) my current net worth and asset allocation.
General wisdom and advice recommends only tracking net worth and asset allocation once or twice per year. However, since I am a finance nerd (and enjoy it!) and tracking my progress keeps me motivated financially, I do this action once per month. Furthermore, as a passive (index fund) investor, asset allocation and rebalancing is pretty much the only thing I can do with my investing strategy!
In this monthly review, I check my current asset allocation percentages against my investment strategy allocation targets, and rebalance allocation levels if I am outside the +/- 5% band level.
3) Updating My Progress On My Blog Holds Me More Accountable
Last but certainly not least, having a public place (My Personal Finance Journey) where I post these net worth and financial goal updates helps keep me much more accountable than if I was just plugging along by myself.
It is very refreshing to have a place where I can share my thoughts and progress with other link-minded folks and learn new things that I can deploy in my financial strategy.
How about you all? What motivates you to keep “on-track” financially?
Share your experiences by commenting below!