Mindful Financial Planning
Learn the steps to a financial plan that will work to have you reach your goals in a jiffy.
Financial planning may well be a life-long process. But what can you do today? This week/ This month.
Step 1 of a good financial plan is articulating your goals. Being mindful while articulating goals is always very helpful. When we are mindful of our values and our shortcomings, we create goals that are more realistic and that we are more likely to reach. Pie in the sky goals can be very frustrating while stretch goals help us to stretch and grow. Have you articulated your financial goals? Have you written them down?
Step 2 of getting your “financial house” in order is compiling all your paperwork. Every receipt, every paycheck, every scrap of paper gets gathered and accounted for. You cannot be mindful of things you simply do not know about.
Step 3 is where mindfulness really comes in. In his 2016 article, Thomas Smith tells us the next thing we have to do is create heuristics or mental shortcuts that help us make good choices in the moment. When we are in the supermarket and we see the expensive coffee we just love we have a mental shortcut, what will I take out of the basket that is on my shopping list so that I can buy this fancy coffee. We have mindfully chosen this mental shortcut and it helps us overcome the impulse. The more of these shortcuts that we have and the more we have practiced using them, the easier it will be to suppress impulses.
These first three steps are the tools in your toolbox to start making choices. Step 4 is establishing a budget. Again, mindfulness is very important here when we really chose our priorities. What is more important? A bigger, nicer car or 4 more pieces of clothing each month. Neither is a good or bad choice if it is made mindfully and you stick to the budget. Perhaps a choice that really puts your goals and values to the test is, “Should I give $100 to charity or should I put $100 in savings?” Is a compromise of 50 / 50 acceptable based on my values? Again, the only bad choice is no choice at all.
These first four steps deal with the past and present. Once you have done all this work, and it is a lot of hard work, you get to look to the future and carry out step 5 – financial planning. A written (yes, written) plan of what your goals are and what you will do each week and each month to reach that plan. How much will go to reducing debt? How much will go to saving for a new car or buying a home? How much do I need to set aside for emergencies? How much will go to retirement savings?
I am willing to bet that I have not really taught you anything new so far. You have probably read these steps many times before. But have you taken these steps? The mindfulness literature that most people are familiar with is the techniques to achieve mindfulness like breathing, meditation and yoga. But part of the literature includes the “hindrances” or things that trip us up when we are trying to be mindful. And these align so well with the things that trip us up when we are trying to be financially responsible. In Smith’s article he quotes five hindrances as being (1) attachment, (2) aversion, (3) ignorance, delusion, and confusion, (4) envy and jealousy, and (5) pride. How much are we attached to having new clothes every month? How averse are we to saying “no” when our friends invite us to go out for drinks? How jealous do we feel when someone at work goes on and on about their new car? How much does pride prevent us from giving up a house we really cannot afford?
One last piece of advice to you – use the KISS principle. Keep It Simple, Stupid! A great quote from Thomas Smith’s article, “If the devil’s in the details, angels rejoice in their simplicity.” Make a simple, do-able financial plan, stick to it, and you will reach your financial goals quickly and easily.