Have you ever heard someone talk about how they “just knew they had to do something.” It was their purpose, they had to act. At one point or another we have all heard a rendition of this story from someone. Perhaps we even experienced this feeling ourselves. Last week we talked about creating a “why” about your personal finances. This exercise is important because it allows you to develop the purpose behind all your work and effort in understanding and building you personal financial portfolio. However; just like the story we may have heard or the experience we may have had, knowing or understanding your purpose is very different from acting upon it.
Personal finance stories are a treasure trove of “I wish I had’s.” I wish I had know this, I wish I had not done that, I knew I was supposed to but didn’t. Everyone has these stories, it is part of the process of growing up and learning from previous experiences. Sometimes we don’t know why we made a particular financial decision, it seemed like a good idea, but in retrospect we know now it was not the best. It is not that we are bad financial managers, we simply did not act in a manner consistent with a particular vision.
The vision is the “why.” Last week we talked about how the “why” creates purpose for your financial actions. By knowing your ultimate goal or purpose for your personal finances you can better align your decisions. For example, when you want to purchase the brand-new television, is it because you need a new one, or is it because you just want the latest and greatest? If you think back to your vision for your personal finances you may find that the decision to spend some of your savings on the television does not fit with your goal of providing for a particular retirement or your child’s college education. It is not that buying a new television is bad, but if you think of your personal financial purpose, the purchase of the television may not fit with that vision.
Remember that the “why” is not a goal, it is a purpose and it is important to distinguish the two. The “why” drives your larger vision for your personal financial future. Goals on the other hand are stepping stones and targets used to create a path toward your overall vision. Think as goals as mile markers on a journey to your destination. Each mile marker you reach brings you closer to your ultimate destination.
Having a vision for the future is important, but having a purpose for the future is even better. Using the “why” in every day financial decisions will keep you focused on your goals and future intentions for your finances. Next time you are faced with a relatively small financial decision fall back to your “why” and it will help you stay on track towards your goals and purpose for your personal finances.
Jonathon Rowles Captain, USMC (Ret.)
Disclaimer: (have to do it) – This blog should not be considered financial, investment, legal or tax advice. Consult your licensed financial professional, tax advisor or legal counsel. This blog is for educational purposes only.