Personal Money Tips

I was busy last few weeks. I’m sure you, my readers would have noticed, since there wasn’t any update after 8th January. To say that my hands are full would be an understatement. At the beginning of the year, I sketched a mind map of all the things I’m currently involved in and/or need my attention. It wasn’t a pretty picture. I knew if I wanted to do all the things I have in mind, I needed help.

An so I got myself the book titled “Getting Thing Done” by David Allen. I found out about it on someone’s blog, can’t remember which one, and later I found myself browsing through the book at the book store. My interest was piqued because especially when David mentioned that if we don’t have a system to manage our “stuff”, stuff meaning anything that need our attention, big or small, then it would be hard to move on to big picture things. This is because our subconscious mind have so much to deal with, it tells itself, I don’t have the time. So higher level, big picture things like financial goals etc don’t get accomplish. In fact, you don’t stand much chance of ever getting them because of the stuff that comes at you. So David advocated handling the small properly before we handle big picture, life changing stuff. Ok, so I get the book, and reached the part about natural planning, which I’m about to go into.

The reason I’m writing about natural planning is financial planning is also a part of planning, right? Hope you said right. Anyway, after reading what David wrote in his book, planning should be something that is easy because the mind naturally plans thing all the time. The steps are as follow:-

1. Define the purpose

2. What is the outcome you want to see

3. Brainstorm your options

4. Organize the plan

5. Identifying your next action steps

The example given in the book is to plan for a dinner out. The intention of having dinner outside, is the purpose and it triggers your internal planning process automatically. The boundaries of your plan are your principles or values for example your budget, location, service, convenience etc. While you are considering all that, you visualize the place and how the evening would turn out. This vision of what you imagine, is the outcome that you wanted when you decided to have dinner. Next your mind would automatically brainstorm the options including possible problems like what to wear, is the place open, is it going to be crowded etc. This part according to David Allen is the “how” part. Next, you being to organize your plan like making the necessary call to the restaurants, checking prices, availability, confirming with the friends you are going to invite. Finally after all that, your next action will be to confirm the reservation. This is how we plan and we know it automatically.

Paraphrasing what was written

“you have an urge to make something happen, you image the results you wanted, you brainstorm about relevant ideas, you sort though those ideas, and define a physical action to make it a reality”

I’m sure you already know what I’m getting at. You can use the same method to set financial goals. Say you want to save $ 10,000 by the end of the year. The boundaries of you plan will be your principles i.e you are not going to steal to get the money, or sell drugs or do something illegal, or gamble, so it is going to be legal. Or if one of your options is to gamble, then you hare already brainstorm that as an option Next your options could be working a second job, to cut your expenses and anything else that comes up. After organizing your thoughts and options and selecting the best possible option, you would write down the necessary actions to take.

Most of us do, which is to think “how” we are going to save $ 10,000 before really deciding on the purpose and actually visualizing the outcome. Then we don’t follow through on the next action implementation part. That a possible reason, most of us don’t succeed. Why not try this out for a change. It might work for you.

Technorati Tags: better planning method

I thought I’d start of the year to remind all the readers here about the 80/20 rule. I’m sure you have heard of it before. If not, the 80/20 rule basically says that 80% of your results in life will come from focusing on the 20% of things you do best or you must do. Also called the Pareto principle, statistically almost everything in life follows this principle. For example, in a sales organization, 80% of all the sales will be brought in by 20% of the sales people. Instead of just getting down goals setting, which is important, by the way, you must also brush up on the skills that will help you get where you want financially.

photo from wikipedia

The same can be said of your time. If you just focus of doing the 20% of things that really matter, you will generate 80% of the result you want. If you want to earn more income, have a clear idea what your 20% is. If not, your financial situation will not change. Look at it this way. In order to change you life, you need new input that you need to put into practice.

Let’s say you want on invest in real estate this year. You have to spend time learning about real estate, attend some seminars and go look at some property. All that takes time. And most of us don’t have time to carve out unless you have been a couch potato in the past. Most of us have jobs, family, children and 1001 things to manage and to take care of. The only way forward is to reduce stuff you are doing but don’t give you the results you want. And the problem is, most of the stuff that needs your attention are urgent but not that important. A personal example, moving the lawn. Urgent not very important. This task should be and must be delegated.

Make a list of the important task. Generally speaking, most important task that are not urgent are the ones that will get you ahead. Say learning about real estate investment. It is important to your financial future, but a messed up house is more urgent to clean, well for some of us anyway. But, you get the idea. If you have to procrastinate, learn to procrastinate on not doing the stuff that don’t matter. If you do this, yeah, your home might not be perfect but still the important life changing things will get done. More often than not, you probably find a quicker way to get the urgent things done more effectively along the way. Most people try to live their lives at a ever more rapid pace. That will only take the joy out of live not to mention probably giving you a heart attack.

If I have to leave a new year message, this would be it. Do less, not more. But do the important stuff first.

Technorati Tags: 80 20 rule, new year resolutions, pareto-principle

Ed.